-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Jcp+c7YJ+BfYJz00Slcc+gyf7A+JDPi3LAMhmtim/zZkXfxvlD43yavcamMBG9SH pse15j1YNtBopZLaTm4tRw== 0000950135-94-000548.txt : 19940902 0000950135-94-000548.hdr.sgml : 19940902 ACCESSION NUMBER: 0000950135-94-000548 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940901 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLEET FINANCIAL GROUP INC /RI/ CENTRAL INDEX KEY: 0000050341 STANDARD INDUSTRIAL CLASSIFICATION: 6021 IRS NUMBER: 050341324 STATE OF INCORPORATION: RI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-50216 FILM NUMBER: 94547640 BUSINESS ADDRESS: STREET 1: 50 KENNEDY PLZ CITY: PROVIDENCE STATE: RI ZIP: 02903 BUSINESS PHONE: 4012786000 MAIL ADDRESS: STREET 1: 111 WESTMINISTER STREET CITY: PROVIDENCE STATE: RI ZIP: 02903 FORMER COMPANY: FORMER CONFORMED NAME: FLEET NORSTAR FINANCIAL GROUP INC DATE OF NAME CHANGE: 19920525 FORMER COMPANY: FORMER CONFORMED NAME: FLEET FINANCIAL GROUP INC DATE OF NAME CHANGE: 19880110 FORMER COMPANY: FORMER CONFORMED NAME: INDUSTRIAL NATIONAL CORP DATE OF NAME CHANGE: 19820512 424B5 1 FLEET FINANCIAL GROUP, INC. 424(B)(5) 1 PROSPECTUS SUPPLEMENT (To Prospectus Dated November 30, 1992) [LOGO] $200,000,000 FLEET FINANCIAL GROUP, INC. 7 1/4% NOTES DUE 1999 ------------------------ The Notes will mature on September 1, 1999, and may not be redeemed prior to maturity. Interest on the Notes offered hereby is payable semiannually on March 1 and September 1 of each year, commencing March 1, 1995. See "Description of Notes". The Notes will be represented by Global Securities registered in the name of the nominee of The Depository Trust Company (the "Depository"). Interests in the Global Securities will be shown on, and transfers thereof will be effected only through, records maintained by the Depository and its participants. Except as provided herein, Notes in definitive form will not be issued. Settlement for the Notes will be made in immediately available funds. The Notes will trade in the Depository's Same-Day Funds Settlement System until maturity, and secondary market trading activity for the Notes will therefore settle in immediately available funds. All payments of principal and interest will be made by Fleet Financial Group, Inc. ("Fleet") in immediately available funds. See "Description of Notes -- Same-Day Settlement and Payment". ------------------------ THE NOTES ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF FLEET AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- PRICE TO UNDERWRITING PROCEEDS TO PUBLIC(1) DISCOUNT(2) FLEET(1)(3) - ------------------------------------------------------------------------------------------------- Per Note........................ 99.8% .45% 99.35% - ------------------------------------------------------------------------------------------------- Total........................... $199,600,000 $900,000 $198,700,000 - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from September 7, 1994 to the date of delivery. (2) Fleet has agreed to indemnify the several Underwriters against certain liabilities, including civil liabilities under the Securities Act of 1933, as amended. See "Underwriting." (3) Before deducting expenses payable by Fleet estimated at $175,000. ------------------------ The Notes are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Notes in book-entry form only will be made in New York, New York on or about September 7, 1994. ------------------------ MERRILL LYNCH & CO. CS FIRST BOSTON GOLDMAN, SACHS & CO. SALOMON BROTHERS INC ------------------------ The date of this Prospectus Supplement is August 30, 1994. 2 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. AVAILABLE INFORMATION The following information replaces the information appearing under the heading "Available Information" in the accompanying Prospectus dated November 30, 1992. Fleet is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Proxy statements, reports and other information concerning Fleet can be inspected and copied at the Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's Regional Offices in New York (Suite 1300, Seven World Trade Center, New York, New York 10048) and Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy material and other information concerning Fleet also may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. This Prospectus does not contain all the information set forth in the Registration Statement and Exhibits thereto which Fleet has filed with the Commission under the Securities Act of 1933, as amended (the "Act"), which may be obtained from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees, and to which reference is hereby made. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by Fleet are incorporated in this Prospectus by reference: 1. Annual Report on Form 10-K for the year ended December 31, 1993. 2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994. 3. Current Reports on Form 8-K dated March 10, 1994, May 9, 1994 and August 15, 1994. Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. All documents filed with the Commission by Fleet pursuant to Sections 13, 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Securities offered hereby are incorporated herein by reference and such documents shall be deemed to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus may obtain, without charge, upon written or oral request, a copy of any of the documents incorporated by reference herein (other than the exhibits to such documents). Written requests should be mailed to Robert W. Lougee, Jr., Director of Corporate Communications, Fleet Financial Group, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903. Telephone requests may be directed to (401) 278-5879. S-2 3 FLEET FINANCIAL GROUP, INC. The following information replaces the information appearing under the heading "Fleet Financial Group, Inc." in the accompanying Prospectus dated November 30, 1992. Fleet is a diversified financial services company organized under the laws of the State of Rhode Island. At June 30, 1994, Fleet was the 17th largest banking institution in the United States in terms of total assets, with total assets of $48.2 billion, total deposits of $31.8 billion and stockholders' equity of $3.5 billion. Fleet is engaged in a general commercial banking and trust business, with approximately 800 banking branches located in the states of Rhode Island, New York, Connecticut, Massachusetts, Maine and New Hampshire, through its banking subsidiaries, Fleet National Bank ("Fleet Bank-RI"); Fleet Bank ("Fleet New York"); Fleet Bank, National Association ("Fleet-CT"); Fleet Bank of Massachusetts, National Association ("Fleet-MA"); Fleet Bank of Maine ("Fleet-Maine") and Fleet Bank-NH. Fleet also provides, through its nonbanking subsidiaries, a broad range of financial services, including asset-based lending, consumer finance, mortgage banking, real estate lending, sales of mutual funds, student loan servicing, credit-related life and accident/health insurance, investment banking, investment advice and management, and data processing. Fleet is a legal entity separate and distinct from its subsidiaries. The ability of holders of debt and equity securities of Fleet, including the holders of the Notes offered hereby, to benefit from the distribution of assets of any subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to prior claims of creditors of the subsidiary except to the extent that a claim of Fleet as a creditor may be recognized. There are various statutory and regulatory limitations on the extent to which banking subsidiaries of Fleet can finance or otherwise transfer funds to Fleet or its nonbanking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases. In addition, there are regulatory limitations on the payment of dividends directly or indirectly to Fleet from its banking subsidiaries. Under applicable banking statutes, at June 30, 1994, Fleet's banking subsidiaries could have declared additional dividends of approximately $528 million, of which $264 million could have been declared by Fleet-MA and Fleet-CT. Holders of Fleet's Dual Convertible Preferred Stock are entitled to dividends equal to one-half of the total dividends declared (after the first $15 million in dividends) to Fleet, if any, by Fleet Banking Group, Inc. ("Fleet Banking Group"), a wholly-owned subsidiary of Fleet and the holder of all of the outstanding common stock of each of Fleet-MA and Fleet-CT. As of the date of this Prospectus Supplement, Fleet Banking Group has not paid any dividends on its common stock to Fleet. Federal and state regulatory agencies also have the authority to limit further Fleet's banking subsidiaries' payment of dividends based on other factors, such as the maintenance of adequate capital for such subsidiary bank. Under the policy of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), Fleet is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank in circumstances where it might not do so absent such policy. In addition, any subordinated loans by Fleet to any of the subsidiary banks would also be subordinate in right of payment to deposits and obligations to general creditors of such subsidiary bank. Further, the Crime Control Act of 1990 provides that in the event of the bankruptcy of Fleet, any commitment by Fleet to its regulators to maintain the capital of a banking subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment. For a discussion of various other regulatory matters, including the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA") enacted in December of 1991, and the cross-guaranty provisions imposed on Fleet's banking subsidiaries by Section 206 of the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), see "Management's Analysis of Financial Statements -- Certain Regulatory Considerations". The principal office of Fleet is located at 50 Kennedy Plaza, Providence, Rhode Island 02903, telephone number (401) 278-5800. S-3 4 USE OF PROCEEDS Fleet intends to use the net proceeds from the sale of the Notes for general corporate purposes, including its previously announced repurchase of its Common Stock, $1.00 par value, from time to time in connection with the contemplated merger of NBB Bancorp, Inc. and Fleet, and to extend credit to, or to fund investments in, its subsidiaries and to repay current maturities of long-term debt. The precise amount and timing of extending credit to, or funding investments in, such subsidiaries will depend upon the subsidiaries' funding requirements and the availability of other funds. Pending such applications, the net proceeds may be temporarily invested in marketable securities or short-term money market instruments or applied to the reduction of Fleet's short-term indebtedness. S-4 5 SUMMARY CONSOLIDATED FINANCIAL DATA The following unaudited consolidated summary sets forth selected financial data for Fleet and its subsidiaries for the six months ended June 30, 1994 and 1993 and for each of the years in the five-year period ending December 31, 1993. The following summary should be read in conjunction with the financial information appearing elsewhere in this Prospectus and Prospectus Supplement and incorporated herein by reference to other documents. See "Incorporation of Certain Documents by Reference". The summary for the six months ended June 30, 1994 and 1993 is based on unaudited financial statements which include all adjustments that, in the opinion of management of Fleet, are necessary for a fair presentation of the results of the respective interim periods. The results of operations for the six months ended June 30, 1994 are not necessarily indicative of the results for any other period. All per share information shown below has been adjusted to reflect stock splits and stock dividends as applicable. Certain amounts in prior periods have been reclassified to conform to current-year presentation.
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------------- --------------------------------------------------------------------- 1994(1) 1993 1993 1992 1991(2) 1990(3) 1989 ----------- ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Summary of Operations: Interest income............. $ 1,565 $ 1,616 $ 3,212 $ 3,416 $ 3,329 $ 3,279 $ 3,068 Interest expense............ 575 601 1,161 1,463 1,930 2,126 1,816 Net interest income......... 990 1,015 2,051 1,953 1,399 1,153 1,252 Provisions for credit losses.................... 34 155 271 486 509 762 160 Net interest income after provisions for credit losses.................... 956 860 1,780 1,467 890 391 1,091 Noninterest income.......... 575 700 1,465 1,368 1,082 735 576 Noninterest expense......... 1,050 1,184 2,424 2,318 1,819 1,289 1,128 Income (loss) before income taxes..................... 481 376 821 517 153 (163) 539 Income tax expense (benefit) 191 153 327 228 55 (90) 168 Net income (loss) before minority interest......... 290 223 494 289 98 (74) 371 Minority interest in FMG (after-tax)(4)............ 5 (2) 6 9 0 0 0 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net income (loss)........... $ 285 $ 225 $ 488 $ 280 $ 98 $ (74) $ 371 =========== =========== =========== =========== =========== =========== =========== Earnings (loss) per common share: Primary..................... $1.74 $1.39 $3.01 $1.78 $.67 $(.75) $3.34 Fully diluted............... 1.74 1.38 3.01 1.77 .67 (.75) 3.30 Weighted average primary shares outstanding........ 157,920,587 152,621,535 154,666,307 141,469,658 124,966,226 109,415,386 108,706,377 Weighted average fully diluted shares outstanding............... 158,139,767 152,936,904 154,899,995 142,778,665 127,092,029 111,259,336 111,025,858 Book value per common share(5).................... $22.82 $21.50 $22.84 $19.50 $18.15 $17.65 $19.87 Cash dividends declared per common share................ .65 .475 1.025 .825 .80 1.25 1.31 Common dividend payout ratio(6).................... 31.4% 28.7% 28.7% 36.1% 96.7% --(6) 38.3% Ratio of Earnings to Fixed Charges(7): Excluding interest on deposits.................. 2.80x 2.73x 2.81x 2.22x 1.32x --(7) 1.93x Including interest on deposits.................. 1.80 1.61 1.68 1.34 1.08 --(7) 1.29 Ratio of Earnings to Fixed Charges and Dividends on Preferred Stock(8): Excluding interest on deposits.................. 2.74 2.63 2.67 2.09 1.31 --(8) 1.91 Including interest on deposits.................. 1.79 1.60 1.66 1.33 1.08 --(8) 1.29 Consolidated Balance Sheet -- Average Balances: Total assets................ $ 47,636 $ 45,207 $ 45,966 $ 45,166 $ 38,839 $ 34,363 $ 29,798 Investment securities(9).... 855 1,959 2,496 650 6,787 7,127 4,894 Securities available for sale...................... 14,334 10,492 10,442 11,059 1,376 Loans and leases, net of unearned income........... 25,823 26,127 26,144 26,615 23,995 21,027 20,371 Interest-bearing deposits... 24,487 25,411 25,173 26,551 24,248 18,607 16,914 Short-term borrowings(10)... 8,002 5,141 5,971 4,753 3,284 6,366 4,260 Long-term debt/subordinated notes and debentures...... 3,364 3,788 3,718 3,127 3,020 2,544 1,809 Dual Convertible Preferred Stock(11)................. -- -- -- 283 134 -- -- Stockholders' equity (excluding redeemable preferred stock).......... 3,634 3,375 3,453 2,611 2,269 2,197 2,182
S-5 6
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31, ------------------- ------------------------------------------------------------- 1994(1) 1993 1993 1992 1991(2) 1990(3) 1989 ----- ----- ----- ----- ----- ----- ----- (DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA) Consolidated Ratios(12): Net interest margin (fully taxable equivalent)......... 4.74% 5.05% 5.02% 4.80% 4.09% 3.92% 4.96% Return (loss) on average assets...................... 1.21 1.00 1.06 .62 .25 (.21) 1.25 Return (loss) on average common stockholders' equity...................... 17.25 15.38 16.07 11.01 4.02 (3.93) 17.70 Return (loss) on average stockholders' equity........ 15.27 12.63 13.49 10.72 4.31 (3.35) 17.02 Average stockholders' equity to average assets........... 7.63(13) 7.47(13) 7.51(13) 5.78(13) 5.84(13) 6.39 7.32 Tier 1 risk-based capital ratio(14)................... 11.82 11.57 11.76 10.44 9.77 7.58 7.26 Total risk-based capital ratio(14)................... 16.59 16.70 16.62 15.38 13.79 11.19 10.70 Period-end reserve for possible loan and lease losses to period-end loans and leases, net of unearned income...................... 3.69 3.94% 3.80% 3.86 3.81 3.42 1.58 Net charge-offs to average loans and leases, net of unearned income............. .41 1.17 1.11 2.05 1.65 1.92 .72 Period-end nonperforming assets to period-end loans and leases, net of unearned income, and other real estate owned(15)............ 2.12 3.24 2.27 3.68 5.89 6.64 1.84
- --------------- (1) Effective January 1, 1994, Fleet adopted Financial Accounting Standards Board (FASB) Statement No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The standard requires that securities available for sale be reported at fair value, with unrealized gains or losses reflected as a separate component of stockholders' equity. Previously, these securities were recorded at the lower of amortized cost or fair value with any net unrealized loss included in earnings. In connection with the adoption of Statement No. 115, Fleet transferred securities netting to $767 million from the held to maturity portfolio to the available for sale portfolio. Fleet's Tier 1 capital and total capital ratios do not include any adjustments for unrealized gains or losses relating to securities available for sale. (2) Data for the year ended December 31, 1991 includes results of the banks acquired in the Bank of New England acquisition from July 14, 1991. (3) Results for the year ended December 31, 1990 reflect the restatement of earnings relating to Fleet's accounting for declines in the market value of its marketable equity securities discussed in Fleet's Current Reports on Form 8-K dated May 3, 1991 and August 16, 1991 and its Annual Report on Form 10-K for the year ended December 31, 1991. (4) For the year ended December 31, 1992, the minority interest deduction for Fleet Mortgage Group, Inc. ("FMG") totalled approximately 19% of FMG's earnings from the date of the initial public offering (August 7, 1992) to the end of the period. (5) Common stockholders' equity (used to compute book value per common share) is equal to the difference between total assets and total liabilities less total preferred stockholders' equity. Total assets of Fleet for each relevant period-end include goodwill and core deposit intangible. Such goodwill and core deposit intangible amounted to $331 million, $361 million, $341 million, $212 million and $229 million, at December 31, 1993, 1992, 1991, 1990 and 1989, respectively, and $336 million and $354 million at June 30, 1994 and 1993, respectively. (6) The common dividend payout ratio is equal to the ratio of aggregate common dividends declared during the indicated period to the consolidated net income of Fleet during such period. For the year ended December 31, 1990, common dividends aggregated $137 million and the net loss was $74 million. (7) Earnings consist of income before income taxes plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on short-term debt and long-term debt (including interest related to capitalized leases and capitalized interest) and one-third of rent expense, which approximates the interest component of such expense. In addition, where indicated, fixed charges include interest on deposits. Fixed charges exceeded earnings by $163 million (excluding interest on deposits) and by $163 million (including interest on deposits) for the year ended December 31, 1990. (8) Earnings consist of income before income taxes plus fixed charges (excluding capitalized interest) and the pretax equivalent of dividends on preferred stock. Fixed charges and dividends on preferred stock consist of interest on short-term debt and long-term debt (including interest related to capitalized leases and capitalized interest) and one-third of rent expense, which approximates the interest component of such expense, plus the pretax equivalent of dividends on preferred stock. In addition, where indicated, fixed charges include interest on deposits. The sum of fixed charges and dividends exceeded earnings by $163 million (excluding interest on deposits) and by $163 million (including interest on deposits) for the year ended December 31, 1990. (9) For a discussion of Fleet's reclassification in 1992 of its "portfolio securities" to "securities held for sale", see Fleet's Current Report on Form 8-K dated October 21, 1992. (10) Short-term borrowings consist mainly of federal funds purchased, securities sold under agreements to repurchase, commercial paper and bank debt. (11) The Dual Convertible Preferred Stock was issued in 1991 and reclassified to stockholders' equity as of December 31, 1992. (12) Interim financial percentages have been annualized, where appropriate. (13) Excludes $283 million of Fleet's Dual Convertible Preferred Stock at December 31, 1992 and December 31, 1991 and includes $283 million of Fleet's Dual Convertible Preferred Stock at June 30, 1994, June 30, 1993 and December 31, 1993. Including the $283 million of Dual Convertible Preferred Stock, this ratio would be 6.41% and 6.19% at December 31, 1992 and December 31, 1991, respectively. The Dual Convertible Preferred Stock was reclassified to stockholders' equity as of December 31, 1992; accordingly, average stockholders' equity at December 31, 1993 includes the $283 million of Dual Convertible Preferred Stock in computing this ratio. (14) Calculated using final 1992 risk-based capital guidelines. (15) Nonperforming assets include loans and leases on a nonaccrual basis, loans renegotiated due to the financial deterioration of the borrower and OREO, defined as insubstance foreclosures and other real estate owned. S-6 7 MANAGEMENT'S ANALYSIS OF FINANCIAL STATEMENTS OVERALL PERSPECTIVE Fleet reported net income for the first six months of 1994 of $285 million, or $1.74 per fully diluted share, compared to net income of $225 million, or $1.38 per fully diluted share, for the first six months of 1993. Return on average assets was 1.21% for the six months ending June 30, 1994, compared to 1.00% in the comparable period of 1993, while return on average common stockholders' equity was 17.25% and 15.38% for these respective periods. Return on average assets and return on realized common equity for the second quarter of 1994 were at their highest levels since the first quarter of 1989. The improved results reflect successful implementation of numerous efficiency enhancement initiatives during the second quarter, as well as a continued reduction in asset quality costs. In addition, total loans increased more than $800 million from the first quarter of 1994, primarily due to the growth in commercial loans of nearly $500 million. Additional areas of loan growth during the second quarter of 1994 included commercial real estate and consumer loans, with increases of $131 million and $180 million, respectively. On a quarter-to-quarter basis, Fleet recorded earnings of $152 million for the second quarter of 1994, compared to $119 million for the same period in 1993. Fully diluted earnings per share for the quarter were $0.95, versus $0.72 for the second quarter of 1993. Return on average assets was 1.28% for the second quarter of 1994, compared to 1.05% for the same period in 1993, while return on average common stockholders' equity was 19.24% and 15.51% for these respective periods. NET INTEREST INCOME Net interest income on a fully taxable equivalent basis for the six months ended June 30, 1994 totaled $1,009 million, a decrease of $22 million from the same period in 1993. The net interest margin for the six months ended June 30, 1994 was 4.74%, compared to 5.05% for the first six months of 1993, and 4.70% and 5.06%, respectively, for the second quarters of 1994 and 1993. The decrease was due in part to the restructuring of Fleet's bond portfolio at the beginning of the second quarter of 1994 to shorten the average life of securities in anticipation of a rising rate environment. The net interest margin was also impacted by Fleet's decision in 1993 to mitigate its interest rate exposure on higher-yielding mortgage-backed securities and long-term fixed-rate securities by selling some of these securities and replacing them with lower-yielding and shorter maturity securities. The net interest margin was also negatively impacted by the rising interest rate environment. In an increasing interest rate environment, Fleet's net interest margin will initially be negatively impacted as Fleet's interest-bearing liabilities reprice more rapidly than its interest-earning assets. This was evident during the first six months of 1994 when the Federal Reserve Board increased short-term borrowing rates by 125 basis points. While Fleet increased its prime rate by the same amount, the net interest margin was negatively impacted since the repricing of Fleet's prime-based interest-earning assets lagged behind the repricing of its interest-bearing liabilities. Average interest-earning assets increased $1.8 billion from June 30, 1993 due to net purchases of approximately $2.2 billion of securities, primarily U.S. Treasury securities, in the first half of 1994. The increase in average interest-earning assets was primarily funded by increases in short-term borrowings. The net interest rate spread decreased 28 basis points in the first six months of 1994 compared to the first six months of 1993, and 34 basis points in the quarter ended June 30, 1994 versus the comparable period in 1993. NONINTEREST INCOME Noninterest income totaled $575 million for the first six months of 1994 compared to $700 million for the first six months of 1993. Operating noninterest income (excluding securities available for sale gains and trading income) totaled $549 million for the first six months of 1994, a 1% decrease from the $556 million reported for the comparable period in 1993, and $250 million for the three months ended June 30, 1994, an 8% decrease from the $271 million reported for the same period in 1993. Mortgage banking revenue decreased from $196 million in the first six months of 1993 to $184 million in the first six months of 1994 and from $92 million in the second quarter of 1993 to $84 million in the second S-7 8 quarter of 1994. The decrease was largely due to lower mortgage production revenue (primarily the component relating to gains on sales of loans) as a result of a less favorable interest rate environment. In addition, Fleet Mortgage Group, Inc. ("FMG"), Fleet's mortgage banking subsidiary, recognized $67 million in gains on sales of loans in the first half of 1993 compared to $24 million in the first half of 1994, a 64% decline. Net loan servicing revenue, which had been adversely affected throughout 1993 by prepayments, increased $25 million, or 24%, in the first six months of 1994 compared to the same period in 1993 and $19 million, or 44%, in the second quarter of 1994, compared to the second quarter of 1993. These increases were primarily due to accelerated amortization charges on capitalized excess servicing fees taken during the second quarter of 1993 and an 8% growth in FMG's loan servicing portfolio from $68.2 billion at June 30, 1993 to $73.4 billion at June 30, 1994. Other operating noninterest income decreased $16 million on a quarter-to-quarter basis primarily due to a decline in the value of investments at Fleet Equity Partners, coupled with a $9 million decline in consumer finance servicing income at Fleet Finance, Inc. caused by a lower amount of average loans being serviced. These decreases were offset by a $6 million increase in FDIC loan administration fees due to a higher volume of principal collections during the second quarter of 1994. The decrease in gains recognized by Fleet on securities available for sale is primarily due to the sale of approximately $2.4 billion of mortgage-backed securities during the second quarter of 1993 in order to reduce prepayment sensitivity and shorten the maturity of the portfolio. The $19 million of securities gains recognized in the second quarter of 1994 resulted from the sale of U.S. Treasury securities ($10 million) and the sale of equity securities ($9 million). The U.S. Treasury securities were sold as part of a restructuring of the Corporation's bond portfolio early in the quarter to shorten the average life of securities in anticipation of a rising interest rate environment. NONINTEREST EXPENSE Noninterest expense for the first six months of 1994 totaled $1,050 million, an 11.3% decrease from the $1,184 million reported for the same period in 1993. These results reflect two significant items, the $25 million restructuring charge recorded in the first quarter of 1994 and the accelerated mortgage servicing rights amortization of $90 million incurred in the second quarter of 1993. Excluding these items, noninterest expense was $1,025 million and $1,094 million for the six months ended June 30, 1994 and June 30, 1993, respectively, a 6.3% decrease. Noninterest expense in the second quarter of 1994 totaled $500 million, compared to $551 million for the second quarter of 1993, excluding the accelerated mortgage servicing rights amortization of $90 million incurred in the second quarter of 1993, a decrease of 9.3%. These decreases are mainly attributable to the initial results from Fleet Focus, Fleet's efficiency improvement program, as several initiatives were implemented during the second quarter of 1994, and a decrease in OREO expense, as foreclosed property and repossessed equipment decreased from $218 million at June 30, 1993 to $115 million at June 30, 1994, a 47% decline. In addition, FDIC assessment fees decreased from the six-month period ended June 30, 1993 to the same period in 1994 due to upgrades in Fleet's banking subsidiaries' ratings based upon the strength of their capital positions and other factors. Included in noninterest expense was a $5 million charge recorded in the second quarter of 1994 relating to the sale of certain short-to-intermediate-term instruments held in three proprietary money market funds. The proceeds of such sale were reinvested in instruments considered more appropriate for these types of funds. LOANS AND LEASES Total loans and leases increased $823 million from March 31, 1994, primarily due to a $488 million increase in commercial loans (including both new loans and seasonal advances) principally at Fleet-MA, Fleet-CT and Fleet-RI. Consumer loans increased $180 million, including a $98 million increase in credit card receivables and a $110 million increase in residential real estate loans, offset by decreases in home equity loans and student loans. Commercial loans and commercial real estate loans decreased $103 million and $45 million, respectively, over the first six months of 1994 partially due to significant paydowns, including $378 million of principal S-8 9 collected during the first half of 1994 on loans subject to federal financial assistance, and $66 million of loans put back to the FDIC under federal financial assistance agreements. In addition, the sale of Fleet Factors in the first quarter of 1994 resulted in a $333 million decrease in commercial loans. The federal financial assistance agreement with the FDIC relating to loans acquired as part of the Bank of New England acquisition in 1991 expired on July 14, 1994. Subsequent to June 30, 1994, less than $25 million of commercial and commercial real estate loans, out of a $2.0 billion portfolio, were put back to the FDIC. NONPERFORMING ASSETS Nonperforming assets totaled $560 million at June 30, 1994, compared to $601 million at December 31, 1993. At June 30, 1994, nonperforming assets decreased $49 million, or 8.1% from March 31, 1994 and $292 million, or 34% from June 30, 1993. The largest decreases were noted at Fleet New York, Fleet-RI and Fleet Credit Corporation, a wholly-owned subsidiary of Fleet. Nonperforming assets, as a percentage of total loans, leases, OREO and insubstance foreclosures ("ISFs"), and as a percentage of total assets, were 2.12% and 1.16%, respectively, at June 30, 1994, compared to 2.27% and 1.25%, respectively, at December 31, 1993. Fleet's nonperforming loans and leases totaled $445 million at June 30, 1994, a $20 million decrease from December 31, 1993. The following table shows the balance of nonperforming assets at June 30, 1994:
JUNE 30, 1994 ----------------------------------------------------- COMMERCIAL AND COMMERCIAL CONSUMER/ INDUSTRIAL REAL ESTATE OTHER TOTAL ---------------- ------------ ---------- ------ (DOLLARS IN MILLIONS) Nonperforming loans and leases: Current or less than 90 days past due............................ $ 70 $ 36 $ 11 $117 Noncurrent....................... 88 74 166 328 OREO/ISF.............................. 9 61 45 115 ---- ---- ---- ---- Total nonperforming assets at June 30, 1994(a)............... $167 $171 $222 $560 ==== ==== ==== ==== Total nonperforming assets at December 31, 1993(a)........... $231 $159 $211 $601 ==== ==== ==== ==== - --------------- (a) Throughout this Prospectus Supplement, nonperforming assets and related ratios do not include loans greater than 90 days past due and still accruing interest ($101 million and $77 million at June 30, 1994 and December 31, 1993, respectively, which include approximately $68 million and $62 million of consumer loans, respectively), or assets subject to federal financial assistance ($90 million and $118 million at June 30, 1994 and December 31, 1993, respectively).
RESERVE FOR CREDIT LOSSES Fleet's reserve for credit losses decreased by $30 million from $1.0 billion at December 31, 1993 to $970 million at June 30, 1994, as loans and leases charged off during the period exceeded the amount of the provision and recoveries recognized during the period. Net charge-offs as a percentage of average loans and leases decreased from 1.17% for the six months ended June 30, 1993 to 0.41% for the same period in 1994. Fleet's ratios of reserve for credit losses to nonperforming assets and reserve for credit losses to nonperforming loans were 173% and 218%, respectively, at June 30, 1994, compared to 166% and 215%, respectively, at December 31, 1993. S-9 10 SECURITIES The following table shows the amortized cost and market value of Fleet's securities portfolio as of June 30, 1994 and December 31, 1993:
JUNE 30, 1994 DECEMBER 31, 1993 -------------------- -------------------- AMORTIZED MARKET AMORTIZED MARKET COST VALUE COST VALUE ---------- ------- ---------- ------- (DOLLARS IN MILLIONS) ------------------------------------------- Securities Available for Sale: U.S. Treasury and government agencies....... $ 7,851 $7,739 $ 5,775 $5,950 Mortgage-backed securities.................. 7,010 6,802 5,739 5,878 State and municipal......................... 0 0 733 747 Other debt securities....................... 192 193 250 257 -------- ------ -------- ------ Total debt securities..................... 15,053 14,734 12,497 12,832 -------- ------ -------- ------ Marketable equity securities................ 78 94 64 83 Other securities............................ 98 98 16 16 -------- ------ -------- ------ Total securities available for sale.............. $ 15,229 $14,926 $ 12,577 $12,931 ======== ======= ======== ======= Total securities held to maturity................ $ 748 $ 751 $ 1,546 $ 1,580 ======== ======= ======== ======= Total securities................................. $ 15,977 $15,677 $ 14,123 $14,511 ======== ======= ======== =======
U.S. Treasury and government agencies securities increased $2.1 billion from December 31, 1993 to June 30, 1994 on an amortized cost basis due primarily to net purchases of $2.2 billion of U.S. Treasury securities during the first six months of 1994 as part of Fleet's restructuring of its portfolio to shorten the average life of securities in anticipation of a rising rate environment. Total sales of U.S. Treasury securities during the first half of 1994 generated securities gains of $10 million. During the second quarter of 1994, Fleet also sold approximately $23 million of equity securities which resulted in gains of $9 million. RESULTS OF SUBSIDIARIES For a discussion of the performance of Fleet's subsidiaries, see Fleet's Quarterly Report on Form 10-Q for the quarter ending June 30, 1994, which report is incorporated by reference herein. FUNDING SOURCES Fleet's funding sources consist primarily of deposits, borrowed funds (including federal funds purchased, securities sold under agreements to repurchase and commercial paper) and notes and debentures. Total deposits increased $685 million, or 2.2%, from December 31, 1993 to June 30, 1994, due primarily to the purchase of twenty-nine branches in the state of New York formerly owned by Chemical Bank. Fleet's mix of total deposits shifted slightly as time deposits increased by $1.3 billion from December 31, 1993 to June 30, 1994, while regular savings, NOW and money market deposits decreased by $649 million during the same period. Federal funds purchased and securities sold under agreements to repurchase increased by $1,167 million and $626 million, respectively, from December 31, 1993 to June 30, 1994, as these funding sources offered more favorable interest rates during this period compared to other borrowing sources. These funds were primarily used to fund security purchases during the second quarter of 1994. Commercial paper and other borrowed funds decreased by $606 million and $992 million, respectively, from December 31, 1993 to June 30, 1994. These decreases were primarily at FMG as these borrowings are used to fund mortgages held for resale which declined by $1.7 billion during the same period. LIQUIDITY The following liquidity discussion focuses primarily on developments since December 31, 1993. Accordingly, it should be read in conjunction with the liquidity section on pages 19-20 of the Corporation's S-10 11 1993 Annual Report to Stockholders included as an exhibit to Fleet's Annual Report on Form 10-K, which report is incorporated by reference herein. Fleet's primary sources of liquidity are interest and dividends from subsidiaries and access to the capital and money markets. Fleet's subsidiaries rely on cash flows from operations, core deposits, borrowings, short-term high-quality liquid assets, and in the case of nonbanking subsidiaries, excluding FMG, funds from Fleet for liquidity. During the first six months of 1994, Fleet received $231.9 million in interest and dividends from its subsidiaries and paid $167.6 million in interest and dividends to third parties. Dividends paid by Fleet's banking subsidiaries are limited by various regulatory requirements related to capital adequacy and historic earnings. See "Fleet Financial Group, Inc." Cash and cash equivalents decreased by $26 million during the six month period ended June 30, 1994. This decrease primarily reflected the use of $2.51 billion for investing activities offset in part by $2.04 billion of net cash provided by operating activities and $441 million provided by financing activities. Net cash used for investing activities included net purchases of securities available for sale and securities held to maturity coupled with net increases in loans and leases at the banking subsidiaries. Cash provided by operating activities was mainly attributable to proceeds from the sale of mortgages held for resale, offset in part by originations and purchases of mortgages held for resale. Cash provided by financing activities primarily included increases in deposits offset in part by repayments of long-term debt. At June 30, 1994 and December 31, 1993, Fleet and its subsidiaries had $2.55 billion in confirmed lines of credit of which $700 million and $940 million were outstanding at June 30, 1994 and December 31, 1993, respectively. The amounts outstanding under the lines of credit relate to FMG at both June 30, 1994 and December 31, 1993. On August 1, 1994, FMG increased its available lines of credit from $1.75 billion to $2.20 billion. At June 30, 1994, Fleet had commercial paper outstanding of $731 million compared to $1.3 billion at December 31, 1993. Fleet maintains back-up lines of credit to ensure funding will not be interrupted if commercial paper cannot be issued. Fleet has filed shelf registration statements with the Commission that provide for the issuance of senior or subordinated debt securities and warrants to purchase senior or subordinated debt securities. The total amount of funds available under the shelf registrations was $1.8 billion. As of June 30, 1994, $1.1 billion of debt securities has been issued under this shelf, leaving $629 million in debt securities available for future issuance. In addition, Fleet has filed a preferred stock shelf registration with the Commission that permits the issuance of $445 million in preferred stock, all of which remains available for issuance at June 30, 1994. ASSET AND LIABILITY MANAGEMENT The asset/liability management process at Fleet ensures that the risk to earnings fluctuations from changes in interest rates is prudently managed. To measure and monitor interest-rate risk, management uses various tools, which include an interest-rate sensitivity "gap" analysis, a "rate shock" analysis, and an interest-rate risk reporting schedule, as well as simulation models of balance sheet and interest-rate scenarios under alternative conditions. Internal parameters have been established as guidelines for monitoring these measurements. These guidelines serve as benchmarks for determining actions to balance the current position against overall strategic goals. As of June 30, 1994, management believes Fleet was in a relatively neutral interest-rate sensitivity position. As part of Fleet's interest-rate risk management strategy, Fleet increased its usage of interest-rate swaps over the past year, as the use of interest-rate swaps for asset/liability management can have substantial advantages compared to on-balance-sheet alternatives. These advantages include improved control of interest-rate risks and enhanced balance sheet liquidity. Fleet expects to continue its prudent use of this valuable tool. S-11 12 On a consolidated basis, Fleet had $6.6 billion (notional amount) of interest-rate risk management swaps with external counterparties at June 30, 1994, as summarized in the following table:
WEIGHTED WEIGHTED AVERAGE AVERAGE RATE NOTIONAL MATURITY FAIR ----------------- VALUE (YEARS) VALUE RECEIVE PAY --------- --------- ------ --------- ----- (DOLLARS IN MILLIONS) Interest-rate risk management swaps: Receive fixed/pay variable............ $ 2,503 1.3 $ 9 7.04% 4.99 % Pay fixed/receive variable............ 1,296 4.3 62 4.56 5.82 Basis swaps........................... 80 2.4 (3) (a) (a ) Index-amortizing swaps receive fixed/pay variable.................. 2,770 1.2(b) (96) 5.29 5.58 ------- --- ---- ---- ----- Total............................... $ 6,649 1.9 $(28) 5.81% 5.40 % ======= === ==== ==== ===== - --------------- (a) Basis swaps are interest-rate swaps in which both amounts paid and received are based on floating rates. (b) $2.6 billion of index-amortizing swaps have the potential to extend one additional year, while one five-year $200-million swap has the potential to extend an additional two years.
The interest-rate risk management swap activity for the six months ended June 30, 1994 is summarized in the following table:
RECEIVE PAY INDEX- NOTIONAL AMOUNTS FIXED FIXED BASIS AMORTIZING ---------------- ------- ------ ----- ---------- (DOLLARS IN MILLIONS) Balance at December 31, 1993................................ $ 2,249 $ 985 $-- $2,770 Additions.............................................. 624 311 80 -- Maturities............................................. (370) -- -- -- Terminations........................................... -- -- -- -- ------- ------ ----- ------ Balance at June 30, 1994.................................... $ 2,503 $1,296 $ 80 $2,770 ======= ====== ==== ======
The total notional amount of all interest-rate swaps at June 30, 1994 was $7.4 billion compared to $6.6 billion at December 31, 1993. These amounts include $739 million and $614 million, respectively, of customer swaps. The customer swap portfolio is carried at market value. Customer swaps contributed $1.5 million of trading revenue for the second quarter of 1994. CAPITAL As of June 30, 1994 and December 31, 1993, Fleet's capital ratios, which exceeded all minimum regulatory requirements, were as follows:
JUNE 30, DECEMBER 31, 1994 1993 -------- ------------ (DOLLARS IN MILLIONS) Tier 1 capital..................................... $ 3,540 $ 3,495 Total capital...................................... 4,966 4,939 Risk adjusted assets............................... 29,936 29,713 Tier 1 risk-based capital.......................... 11.82% 11.76% Total risk-based capital........................... 16.59 16.62 Leverage ratio..................................... 7.44 7.48 Common equity/assets............................... 6.53 6.55 Total equity/assets................................ 7.31 7.59
Fleet exceeded the required minimum Tier 1 risk-based capital ratio of 4% and the required total risk-based capital ratio of 8% by approximately $2.3 billion and $2.6 billion, respectively, at both June 30, 1994 and December 31, 1993. Fleet exceeded the 3% minimum leverage ratio of the Federal Reserve Board by approximately $1.6 billion at both June 30, 1994 and December 31, 1993. See "Certain Regulatory S-12 13 Considerations -- Capital Guidelines" for a discussion of the Federal Reserve Board's requirement that bank holding companies maintain a leverage ratio in excess of 3% in certain circumstances. The June 30, 1994 and December 31, 1993, Tier 1 capital, total capital and leverage ratios do not include any adjustments for unrealized gains or losses relating to securities available for sale. CERTAIN REGULATORY CONSIDERATIONS General As a bank holding company, Fleet is subject to regulation by the Federal Reserve Board. Fleet Maine, Fleet Bank-NH and Fleet New York are state-chartered banks that are members of the Federal Reserve System; as such, they are subject to regulation by the Federal Reserve Board and bank regulators in their respective states. Fleet Bank-RI, Fleet-CT and Fleet-MA are national banks subject to regulation and supervision by the Office of the Comptroller of the Currency (the "OCC"). Each subsidiary bank's deposits are insured by the FDIC and is therefore subject to FDIC supervision and regulation. Fleet is also subject to the reporting and other requirements of the Exchange Act. The credit quality of the assets held by certain of Fleet's subsidiaries is subject to periodic review by the state and federal bank regulatory agencies noted above. While Fleet believes its present reserve for credit losses is adequate in light of prevailing economic conditions and the current regulatory environment, there can be no assurance that Fleet's subsidiaries will not be required to make certain adjustments to their reserves for credit losses and charge-off policies in response to changing economic conditions or regulatory examinations. Neither Fleet nor any of its subsidiaries has entered into formal written agreements with state and federal regulators. At the request of its regulators, Fleet and its subsidiaries continue to evaluate and refine oversight and reporting systems and procedures to enhance the ability of such companies to respond to the changing economic environment. In addition to extensive existing government regulation, Federal and state statutes and regulations are subject to changes that may have significant impact on the way in which banks may conduct business. The likelihood and potential effects of any such changes cannot be predicted. Legislation enacted in recent years has substantially increased the level of competition among commercial banks, thrift institutions and non-banking institutions, including insurance companies, brokerage firms, mutual funds, investment banks and major retailers. In addition, the enactment of recent banking legislation such as the FIRREA and the FDICIA have affected the banking industry by, among other things, broadening the regulatory powers of the federal banking agencies in a number of areas. The following summary is qualified in its entirety by the text of the relevant statutes and regulations. FIRREA As a result of the enactment of FIRREA on August 9, 1989, any or all of Fleet's subsidiary banks can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989, in connection with (a) the default of any other of Fleet's subsidiary banks or (b) any assistance provided by the FDIC to any other of Fleet's subsidiary banks in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur without regulatory assistance. FDICIA The FDICIA, which was enacted on December 19, 1991, provides for, among other things, increased funding for the Bank Insurance Fund (the "BIF") of the FDIC and expanded regulation of depository institutions and their affiliates, including parent holding companies. A summary of certain provisions of FDICIA and its implementing regulations is provided below. S-13 14 Risk Based Deposit Insurance Assessments. A significant portion of the additional funding to BIF is in the form of borrowings to be repaid by insurance premiums assessed on BIF members. In addition, the FDICIA provides for an increase in the ratio of the reserves to insured deposits of the BIF to 1.25% by the end of the 15-year period that began with the semi-annual assessment period ending December 31, 1991, also to be financed by insurance premiums. The FDICIA also provides authority for special assessments against insured deposits and for the development of a general risk-based assessment system. The FDIC has set assessment rates for BIF-insured institutions ranging from 0.23% to 0.31%, based on a risk assessment of the institution. Each financial institution is assigned to one of three capital groups -- "well capitalized", "adequately capitalized" or "undercapitalized" -- and further assigned to one of three subgroups within each capital group, on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors and other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. For purposes of the risk-based assessment system, a well-capitalized institution is one that has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based capital of 6% or more, and a leverage ratio of 5% or more. An adequately capitalized institution has a total risk-based capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4% or more, and a leverage ratio of 4% or more. An undercapitalized institution is one that does not meet either of the foregoing definitions. The actual assessment rate applicable to a particular institution, therefore, depends in part upon the risk assessment classification so assigned to the institution by the FDIC. At June 30, 1994, each of Fleet's banking subsidiaries was classified as "well-capitalized" under these provisions. Prompt Corrective Action. The FDICIA also provides the federal banking agencies with broad powers to take prompt corrective action to resolve problems of insured depository institutions, depending upon a particular institution's level of capital. The FDICIA establishes five tiers of capital measurement for regulatory purposes ranging from "well-capitalized" to "critically undercapitalized." Under prompt corrective action regulations adopted by the federal banking agencies in December, 1992, a depository institution is (a) "well-capitalized" if it has a total risk-based capital ratio of 10% or more, a Tier 1 risk-based ratio of 6% or more, a leverage ratio of 5% or more and is not subject to any written agreement, order or capital directive or prompt corrective action directive issued by the primary regulator to meet and maintain a specific capital measure; (b) "adequately capitalized" if it has a total risk-based capital ratio of 8% or more, a Tier 1 risk-based capital ratio of 4% or more and a leverage ratio of 4% or more (3% if the bank is rated composite 1 under the CAMEL rating system in its most recent examination and is not experiencing or anticipating significant growth) and does not qualify as "well-capitalized"; (c) "undercapitalized" if it has a total risk-based capital ratio that is less than 8%, a Tier 1 risk-based capital ratio that is less than 4% or a leverage ratio that is less than 4% (3% if the bank is rated composite 1 under the CAMEL rating system in its most recent examination and is not experiencing or anticipating significant growth); (d) "significantly undercapitalized" if the bank has a total risk-based capital ratio that is less than 6%, a Tier 1 risk-based capital ratio that is less than 3% or a leverage ratio that is less than 3%; and (e) "critically undercapitalized" if the depository institution has a ratio of tangible equity to total assets that is equal to or less than 2% of total assets, or otherwise fails to meet certain established critical capital levels. A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position under certain circumstances. At June 30, 1994, each of Fleet's subsidiary depository institutions was classified as "well-capitalized" under the prompt corrective action regulations described above. Any depository institution that is undercapitalized and which fails to meet regulatory capital requirements specified in the FDICIA must submit a capital restoration plan guaranteed by the bank holding company controlling such institution, and the regulatory agencies may place limits on the asset growth and restrict activities of the institution (including transactions with affiliates), require the institution to raise additional capital, dispose of subsidiaries or assets or to be acquired and, ultimately, require the appointment of a receiver. The guarantee of a controlling bank holding company under the FDICIA of performance of a capital restoration plan is limited to the lower of 5% of an undercapitalized banking subsidiary's assets or the amount required for the bank to be classified as adequately capitalized. Federal banking agencies may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution S-14 15 fails to submit an acceptable plan within the time required (generally 45 days after receiving notice that the institution is undercapitalized, significantly undercapitalized or critically undercapitalized), it is treated as if it is significantly undercapitalized. If the controlling bank holding company fails to fulfill its guaranty obligations under the FDICIA and files (or has filed against it) a petition under the federal Bankruptcy Code, the applicable regulatory agency would have a claim as a general creditor of the bank holding company and, if the capital restoration plan were deemed to be a commitment to maintain capital under the Federal Bankruptcy Code, the claim would be entitled to a priority in such bankruptcy proceeding over unsecured third party creditors of the bank holding company. In addition to the requirement of mandatory submission of a capital restoration plan, under the FDICIA, an undercapitalized institution may not pay management fees to any person having control of the institution nor may an institution, except under certain circumstances and with prior regulatory approval, make any capital distribution if, after making such payment or distribution, the institution would be undercapitalized. Further, undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. Undercapitalized and significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. In addition, significantly undercapitalized depository institutions also are prohibited from awarding bonuses or increasing compensation of senior executive officers until approval of a capital restoration plan. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator. Brokered Deposits and Pass-Through Deposit Insurance Limitation. Under the FDICIA, a depository institution that is well-capitalized may accept brokered deposits and offer interest rates on deposits "significantly higher" than the prevailing rate in its market. A depository institution that is adequately capitalized may accept brokered deposits if it obtains the prior approval of the FDIC. An undercapitalized depository institution may not accept brokered deposits. The definitions of "well-capitalized", "adequately capitalized" and "undercapitalized" conform to the definitions described above for prompt corrective action, except that the term "undercapitalized" also includes an institution that is "significantly undercapitalized" or "critically undercapitalized" under the prompt corrective action requirements. In addition, "pass-through" insurance coverage may not be available for certain employee benefit accounts. In Fleet's opinion, these limitations do not have a material effect on Fleet. Safety and Soundness Standards. The FDICIA directs each federal banking agency to prescribe safety and soundness standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses without impairing capital and, to the extent feasible, a minimum ratio of market value to book value for publicly traded shares. Proposed regulations to implement the safety and soundness standards were issued in November 1993. The ultimate cumulative effect of these standards cannot currently be forecast. The FDICIA also contains a variety of other provisions that may affect Fleet's operations, including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch. Many of the provisions in the FDICIA have recently been or will be implemented through the adoption of regulations by the various federal banking agencies and, therefore, the precise impact on Fleet cannot be assessed at this time. Capital Guidelines. In January 1989, the Federal Reserve Board issued final risk-based capital guidelines for bank holding companies such as Fleet and state-chartered member banks. The new regulatory minimum capital requirements, which became effective in March 1989, have been phased in over the past four years. Under the requirements as fully phased in, the minimum ratio of total capital to risk-adjusted assets (including certain off-balance sheet items, such as standby letters of credit) is 8%. At least half of the total capital is to be comprised of common equity, retained earnings, minority interests in the equity accounts of S-15 16 consolidated subsidiaries and a limited amount of perpetual preferred stock, less goodwill ("Tier 1 capital"). The remainder may consist of perpetual debt, mandatory convertible debt securities, a limited amount of subordinated debt, other preferred stock and a limited amount of loan loss reserves (supplementary capital). In addition, on August 2, 1990, the Federal Reserve Board adopted a leverage ratio (Tier 1 capital to total assets, net of goodwill) of 3% for bank holding companies that meet certain specified criteria, including that they have the highest regulatory rating. The rule indicates that the minimum leverage ratio should be 1% to 2% higher for holding companies undertaking major expansion programs or that do not have the highest regulatory rating. Fleet's national banking subsidiaries are subject to similar capital requirements adopted by the OCC. Under FIRREA and the FDICIA, failure to meet the minimum regulatory capital requirements could subject a banking institution to a variety of enforcement remedies available to federal regulatory authorities, including the termination of deposit insurance by the FDIC and seizure of the institution. Interstate Banking and Branching Legislation On August 8, 1994, the U.S. House of Representatives passed the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act") as reported by the House and Senate Conferees. The Interstate Act generally authorizes bank holding companies to acquire banks located in any state commencing one year after its enactment. In addition, it generally authorizes national and state chartered banks to merge across state lines (and to thereby create interstate branches) commencing June 1, 1997. Under the provisions of the Interstate Act, states are permitted to opt out of this latter interstate branching authority by taking action prior to the commencement date. States may also "opt in" early (i.e., prior to June 1, 1997) to the interstate merger provisions. The Senate vote on the Interstate Act is currently expected to occur in mid-September. Fleet cannot predict whether the bill will become law. Fleet does not currently have any plans generally to consolidate its banking subsidiaries or to take any other actions that would be contingent on the enactment of this legislation. DESCRIPTION OF NOTES The following description of the Notes offered hereby (referred to herein as the "Notes" and in the accompanying Prospectus as the "Senior Securities") supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of the Senior Securities set forth in the accompanying Prospectus, to which description reference is hereby made. GENERAL The Notes will be issued under an indenture dated as of October 1, 1992, between Fleet and The First National Bank of Chicago, as Trustee. The Notes will be limited to $200 million aggregate principal amount and will mature on September 1, 1999. Interest on the Notes will be payable at the rate per annum shown on the cover page of this Prospectus Supplement from September 7, 1994, or from the most recent Interest Payment Date to which interest has been paid or provided for, semiannually on March 1 and September 1 of each year, commencing on March 1, 1995, to the persons in whose names the Notes are registered at the close of business on the February 15 and August 15, as the case may be, next preceding such Interest Payment Date. The Notes are not redeemable prior to maturity. BOOK-ENTRY, DELIVERY AND FORM The Notes will be issued in the form of fully registered Global Securities. The Global Securities will be deposited with, or on behalf of, the Depository and registered in the name of the Depository's nominee. The Depository currently limits the maximum denomination of any global security to $150,000,000. Therefore, for purposes of this Prospectus Supplement, "Global Security" refers to the Global Securities representing the entire issue of Notes offered hereby. The Depository has advised as follows: The Depository is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking S-16 17 Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depository holds securities that its participants ("Participants") deposit with the Depository. The Depository also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct Participants include securities brokers and dealers (including the Underwriters named in this Prospectus Supplement), banks, trust companies, clearing corporations and certain other organizations. The Depository is owned by a number of its direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the Depository's system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). Persons who are not Participants may own beneficial interests in securities held by the Depository only through Participants or indirect participants. The Rules applicable to the Depository and its Participants are on file with the Commission. The Depository has advised that pursuant to procedures established by it (i) upon issuance of the Global Security by Fleet, the Depository will credit the accounts of the Participants designated by the Underwriters with the principal amount of the Notes purchased by the Underwriters and (ii) ownership of beneficial interests in the Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depository (with respect to Participants' interests), the Participants and the indirect participants (with respect to the owners of beneficial interests in such Global Security). The laws of some states may require that certain persons take physical delivery in definitive form of securities which they own. Consequently, such persons may be prohibited from purchasing beneficial interests in the Global Security from any beneficial owner or otherwise. So long as the Depository's nominee is the registered owner of the Global Security, such nominee for all purposes will be considered the sole owner or holder of the Notes represented by such Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in the Global Security will not be entitled to have any of the Notes represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of the Notes in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in the Global Security must rely on the procedures of the Depository and, if such person is not a Participant, on the procedures of the Participant and, if applicable, the indirect participant, through which such person owns its interest, to exercise any rights of a holder under the Indenture. Fleet understands that under existing practice, in the event that Fleet requests any action of the holders or a beneficial owner desires to take any action a holder is entitled to take, the Depository would act upon the instructions of, or authorize, the Participant to take such action. Principal and interest payments on the Global Security registered in the name of the Depository's nominee will be made to the Depository's nominee as the registered owner of such Global Security. Fleet and the Trustee will treat the person in whose name the Global Security is registered as the owner of such Global Security for the purpose of receiving payment of principal and interest on the Notes and for all other purposes whatsoever. None of Fleet, the Trustee, the Paying Agent or the Security Registrar has any responsibility or liability for the payment of principal or interest on the Notes to owners of beneficial interests in the Global Security. The Depository has advised that upon receipt of any payment of principal or interest in respect of the Global Security, it will immediately credit the accounts of the Participants with such payment in amounts proportionate to their respective beneficial interests in such Global Security as shown on the records of the Depository. Payments by Participants and indirect participants to owners of beneficial interests in the Global Security will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of the Participants or indirect participants. None of Fleet, the Trustee, the Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests S-17 18 in the Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Global Security representing all but not part of the Notes being offered hereby is exchangeable for Notes in definitive form of like tenor and terms if (i) the Depository notifies Fleet that it is unwilling or unable to continue as depository for such Global Security or if at any time the Depository ceases to be a clearing agency registered under the Exchange Act, and, in either case, a successor depository is not appointed by Fleet within 90 days of receipt by Fleet of such notice or of Fleet becoming aware of such ineligibility, (ii) Fleet in its discretion at any time determines not to have all of the Notes represented by the Global Security and notifies the Trustee thereof, or (iii) an Event of Default has occurred and is continuing with respect to the Notes. The Global Security exchangeable pursuant to the preceding sentence shall be exchangeable for Notes issuable in authorized denominations and registered in such names as the Depository holding such Global Security shall direct. Subject to the foregoing, a Global Security is not exchangeable, except for a Note or Notes of the same aggregate denomination to be registered in the name of the depository or its nominee or in the name of a successor of the Depository or a nominee of such successor. A further description of the Depository's procedures with respect to the Global Security representing the Notes is set forth in the Prospectus under "Description of Debt Securities -- Global Securities". The Depository has confirmed that it intends to follow such procedures. SAME-DAY SETTLEMENT AND PAYMENT Settlement for the Notes will be made by the Underwriters in immediately available funds. All payments of principal and interest will be made by Fleet in immediately available funds. Secondary trading in long-term notes and debentures of corporate issuers is generally settled in clearinghouse or next-day funds. In contrast, the Notes will trade in the Depository's Same-Day Funds Settlement System until maturity, and secondary market trading activity in the Notes will therefore be required by the Depository to settle in immediately available funds. No assurance can be given as to the effect, if any, of settlement in immediately available funds on trading activity in the Notes. S-18 19 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement (the "Underwriting Agreement"), Fleet has agreed to sell to each of the Underwriters named below, and each of the Underwriters has severally agreed to purchase, the principal amount of the Notes set forth opposite its name below. In the Underwriting Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the Notes offered hereby, if any of the Notes are purchased. In the event of default by an Underwriter, the Underwriting Agreement provides that, in certain circumstances, the purchase commitment of the non-defaulting Underwriters may be increased or the Underwriting Agreement may be terminated.
PRINCIPAL UNDERWRITERS AMOUNT ------------ Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................. $ 50,000,000 CS First Boston Corporation........................................... 50,000,000 Goldman, Sachs & Co................................................... 50,000,000 Salomon Brothers Inc.................................................. 50,000,000 ------------ Total.................................................... $200,000,000 ============
The Underwriters have advised Fleet that they propose initially to offer the Notes to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of .3% of the principal amount of the Notes. The Underwriters may allow, and such dealers may reallow, a discount not in excess of .25% of the principal amount of the Notes to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. All secondary trading in the Notes will settle in immediately available funds. See "Description of Notes -- Same-Day Settlement and Payment". The Underwriting Agreement provides that Fleet will indemnify the several Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended, or contribute to payments which the Underwriters may be required to make in respect thereof. Fleet does not intend to apply for listing of the Notes on a national securities exchange, but has been advised by the Underwriters that the Underwriters presently intend to make a market in the Notes, as permitted by applicable laws and regulations. The Underwriters are not obligated, however, to make a market in the Notes, and any such market making may be discontinued at any time at the sole discretion of the Underwriters. Accordingly, no assurance can be given as to the liquidity of, or trading markets for, the Notes. Certain of the Underwriters and their associates and affiliates may be customers of, have borrowing relationships with, engage in other transactions with, and/or perform services, including investment banking services, for, Fleet and its subsidiaries in the ordinary course of business. EXPERTS The following information replaces the information appearing under the heading "Experts" in the accompanying Prospectus dated November 30, 1992. The consolidated financial statements of Fleet appearing in Fleet's 1993 Annual Report to Stockholders and incorporated by reference in Fleet's 1993 Annual Report on Form 10-K for the year ended December 31, 1993, incorporated by reference herein, have been incorporated by reference herein in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. S-19 20 LEGAL OPINIONS The following information replaces the information appearing under the heading "Legal Opinions" in the accompanying Prospectus dated November 30, 1992. The validity of the Notes offered hereby will be passed upon for Fleet by Edwards & Angell, One Hospital Trust Plaza, Providence, Rhode Island 02903, and for the Underwriters by Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019. V. Duncan Johnson, a partner of Edwards & Angell, is a director of Fleet National Bank and beneficially owns 4,052 shares of Common Stock. S-20 21 PROSPECTUS DEBT SECURITIES AND WARRANTS [FLEET FINANCIAL GROUP LOGO] FLEET FINANCIAL GROUP, INC. Fleet Financial Group, Inc. ("Fleet") from time to time may offer its debt securities (the "Debt Securities"), which may be either senior (the "Senior Securities") or subordinated (the "Subordinated Securities") in priority of payment, and warrants to purchase Debt Securities (the "Warrants"). Fleet may issue Debt Securities having proceeds of up to an aggregate of $1,031,900,000 (or the equivalent thereof if any of the Debt Securities are denominated in a foreign currency or a foreign currency unit, such as European Currency Units ("ECU")). The Debt Securities and Warrants may be offered as separate series in amounts, at prices and on terms to be determined at the time of sale and to be set forth in supplements to this Prospectus (a "Prospectus Supplement"). As used herein, Debt Securities shall include securities denominated in U.S. dollars or, at the option of Fleet if so specified in the applicable Prospectus Supplement, in any other currency, including composite currencies such as the ECU. Fleet may sell Debt Securities and Warrants to or through underwriters or dealers, and also may sell Debt Securities and Warrants directly to other purchasers or through agents. See "Plan of Distribution". Fleet may sell Debt Securities and Warrants in an offering within the United States ("United States Offering") or Debt Securities outside the United States ("International Offering"). The specific designation, priority, aggregate principal amount, denominations, currency or currency unit for which Debt Securities may be purchased, currency or currency unit in which the principal and any interest on Debt Securities is payable, location of the offering, maturity, rate (which may be fixed or variable) and time of payment of interest, if any, terms for redemption, if any, at the option of Fleet or the holder, terms for sinking or purchase fund payments, if any, whether any Debt Securities which are Subordinated Securities will be Subordinated to other indebtedness of Fleet, the initial public offering price, if any, of the Debt Securities, terms relating to temporary or permanent global securities, special provisions relating to Debt Securities in bearer form, the duration, offering price, exercise price and detachability of any Warrants, provisions regarding registration of transfer or exchange, provisions relating to the payment of any additional amounts, provisions regarding original issue discount securities, and the names of, and the principal amounts, if any, to be purchased by, underwriters, the compensation of such underwriters and the other terms in connection with the offering and sale of the Debt Securities and Warrants in respect of which this Prospectus is being delivered, will be set forth in the applicable Prospectus Supplement. Debt Securities of a series may be issuable in individual registered form without coupons, in the form of one or more global securities, or, in bearer form with or without coupons. Such bearer securities will be offered only to non-United States persons and to offices located outside of the United States of certain United States financial institutions. THE DEBT SECURITIES AND WARRANTS ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF FLEET AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND OR ANY OTHER GOVERNMENT AGENCY. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is November 30, 1992. 22 AVAILABLE INFORMATION Fleet is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Securities and Exchange Commission (the "Commission"). Proxy statements, reports and other information concerning Fleet can be inspected and copied at the Commission's office at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the Commission's Regional Offices in New York (Room 1400, 75 Park Place, New York, New York 10007) and Chicago (Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661), and copies of such material can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy material and other information concerning Fleet also may be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. This Prospectus does not contain all the information set forth in the Registration Statement and Exhibits thereto which Fleet has filed with the Commission under the Securities Act of 1933, as amended (the "Act"), which may be obtained from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees, and to which reference is hereby made. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission by Fleet are incorporated in this Prospectus by reference: 1. Annual Report on Form 10-K for the year ended December 31, 1991 (as amended by a Form 8 dated October 21, 1992). 2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1992 (as amended by Forms 8 dated May 18, 1992 and October 21, 1992), June 30, 1992 (as amended by a Form 8 dated October 21, 1992) and September 30, 1992. 3. Current Reports on Form 8-K dated January 24, 1992, February 18, 1992, March 5, 1992, June 19, 1992, June 30, 1992, July 13, 1992, August 7, 1992 (as amended by a Form 8 dated October 26, 1992), September 16, 1992, October 8, 1992, October 21, 1992, November 30, 1992 and November 30, 1992. All documents filed with the Commission by Fleet pursuant to Sections 13, 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Debt Securities and Warrants offered hereby are incorporated herein by reference and such documents shall be deemed to be a part hereof from the date of filing of such documents. Any statement contained in this Prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus may obtain, without charge, upon written or oral request, a copy of any of the documents incorporated by reference herein (other than the exhibits to such documents). Written requests should be mailed to Robert W. Lougee, Jr., Director of Corporate Communications, Fleet Financial Group, Inc., 50 Kennedy Plaza, Providence, Rhode Island 02903. Telephone requests may be directed to (401) 278-5879. FLEET FINANCIAL GROUP, INC. Fleet is a diversified financial services company organized under the laws of the State of Rhode Island. At September 30, 1992, Fleet was the 14th largest banking institution in the United States in terms of total assets, with total assets of $45.4 billion, total deposits of $31.6 billion and stockholders' equity of $2.7 billion. 2 23 Fleet is engaged in a general commercial banking and trust business throughout the States of Rhode Island, New York, Connecticut, Massachusetts, Maine and New Hampshire through its banking subsidiaries, Fleet National Bank ("Fleet Bank-RI"); Fleet Bank of New York ("Fleet Bank-Upstate New York"), and Fleet Bank ("Fleet Bank-Long Island") (collectively, the "New York Banks"); Fleet Bank, National Association ("Fleet-CT"); Fleet Bank of Massachusetts, National Association ("Fleet-MA"); Fleet Bank of Maine ("Fleet-Maine") and Fleet Bank-NH. On July 14, 1991, Fleet completed the acquisition (the "BNE Acquisition") of certain assets and the assumption of certain liabilities of New Bank of New England, National Association, The New Connecticut Bank and Trust Company, National Association and New Maine National Bank (collectively, the "BNE Group" or the "BNE Banking Franchise"). The members of the BNE Group were organized as bridge banks by the Federal Deposit Insurance Corporation (the "FDIC") to acquire certain assets and assume certain liabilities of former bank subsidiaries of Bank of New England Corporation which were declared insolvent on January 6, 1991. For a more detailed description of the BNE Acquisition and copies of certain documents related thereto, see Fleet's Current Reports on Form 8-K dated April 22, 1991 (as amended), July 14, 1991 and November 14, 1991. Fleet Bank-RI has 44 branches located throughout Rhode Island; the New York Banks have 319 branches located throughout New York; Fleet-CT has 142 branches located throughout Connecticut; Fleet-MA has 145 branches located throughout Massachusetts; Fleet-Maine has 106 branches located throughout Maine; and Fleet Bank-NH has 34 branches located throughout New Hampshire. Fleet also provides, through its nonbanking subsidiaries, a broad range of financial services, including asset-based lending, consumer finance, mortgage banking, real estate lending, student loan servicing, credit-related life and accident/health insurance, investment banking, investment advice and management, and data processing. Fleet is a legal entity separate and distinct from its subsidiaries. There are various limitations on the extent to which banking subsidiaries of Fleet can finance or otherwise transfer funds to Fleet or its nonbanking subsidiaries, whether in the form of loans, extensions of credit, investments or asset purchases. Such transfers by any subsidiary bank to Fleet or any nonbanking subsidiary are limited in amount to 10% of the bank's capital and surplus and, with respect to Fleet and all such nonbanking subsidiaries, to an aggregate of 20% of each such bank's capital and surplus. Furthermore, loans and extensions of credit are required to be secured in specified amounts and are required to be on terms and conditions consistent with safe and sound banking practice. In addition, there are regulatory limitations on the payment of dividends directly or indirectly to Fleet from its banking subsidiaries. Under applicable banking statutes, at September 30, 1992, Fleet's banking subsidiaries could have declared additional dividends of approximately $286 million. In addition, federal and state regulatory agencies have the authority to limit further Fleet's banking subsidiaries' payment of dividends. The payment of dividends by any subsidiary bank may also be affected by other factors, such as the maintenance of adequate capital for such subsidiary bank. In addition, neither Fleet-MA nor Fleet-CT may pay dividends to Fleet without the prior approval of the FDIC if any shares of the Class I nonvoting nonconvertible preferred stock issued to the FDIC in connection with the BNE Acquisition are outstanding or if either of such banks is in arrears on the payment of dividends on its Class II nonvoting nonconvertible perpetual preferred stock issued to the FDIC in connection with the BNE Acquisition. Further, holders of Fleet's dual convertible preferred stock issued in connection with the BNE Acquisition are entitled to dividends equal to one-half of the total dividends declared (after the first $15 million in dividends), if any, by Fleet-MA and Fleet-CT to Fleet. Under the policy of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), Fleet is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support such subsidiary bank in circumstances where it might not do so absent such policy. In addition, any subordinated loans by Fleet to any of the subsidiary banks would also be subordinate in right of payment to deposits and obligations to general creditors of such subsidiary bank. 3 24 As a result of the enactment of Section 206 of the Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA") on August 9, 1989, a depository institution insured by the FDIC can be held liable for any loss incurred by, or reasonably expected to be incurred by, the FDIC after August 9, 1989, in connection with (i) the default of a commonly controlled FDIC-insured depository institution or (ii) any assistance provided by the FDIC to a commonly controlled FDIC-insured depository institution in danger of default. "Default" is defined generally as the appointment of a conservator or receiver and "in danger of default" is defined generally as the existence of certain conditions indicating that a "default" is likely to occur in the absence of regulatory assistance. On December 19, 1991, the Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDICIA") was enacted. Among other things, the FDICIA provides increased funding for the Bank Insurance Fund (the "BIF") of the FDIC and provides for expanded regulation of depository institutions and their affiliates, including parent holding companies. A significant portion of the additional funding to BIF will be in the form of borrowings to be repaid by insurance premiums assessed on BIF members. These premium increases would be in addition to other increases in deposit premiums during 1992. In addition, the FDICIA provides for an increase in the ratio of reserves to insured deposits to 1.25% within the next 15 years, also to be financed by insurance premiums. The result of these provisions could be a significant increase in the assessment rate on deposits of BIF members over the next 15 years. No assurance can be given at this time as to what the level of premiums will be during this 15-year period. The FDICIA also provides authority for special assessments against insured deposits and for the development of a general risk-based assessment system. The FDIC set assessment rates for the BIF of 0.23% effective June 30, 1991. In September of 1992, the FDIC adopted a transitional risk-based assessment system which increases the assessment rates for depository institutions. Under the new schedule, which will take effect for the period beginning January 1, 1993, assessment rates initially will range from 0.23% to 0.31%. Each financial institution will be assigned to one of three capital groups -- well capitalized, adequately capitalized or undercapitalized -- and further assigned to one of three subgroups within a capital group, on the basis of supervisory evaluations by the institution's primary federal and, if applicable, state supervisors and other information relevant to the institution's financial condition and the risk posed to the applicable insurance fund. The actual assessment rate applicable to a particular institution will, therefore, depend in part upon the risk assessment classification so assigned to the institution by the FDIC. The FDICIA also provides the federal banking agencies with broad powers to take corrective action to resolve problems of insured depository institutions, depending upon a particular institution's level of capital. The FDICIA establishes five tiers of capital measurement for regulatory purposes ranging from "Well-Capitalized" to "Critically Undercapitalized." Under regulations adopted by the Federal banking agencies on September 29, 1992, a depository institution is "Well Capitalized" if it significantly exceeds the minimum level required by regulation for each relevant capital measure, "Adequately Capitalized" if it meets each such measure, "Undercapitalized" if it fails to meet any such measure, "Significantly Undercapitalized" if it is significantly below such measure and "Critically Undercapitalized" if its tangible equity is not greater than 2% of total tangible assets, or otherwise fails to meet certain established critical capital levels. A depository institution may be deemed to be in a capitalization category that is lower than is indicated by its actual capital position if it receives an unsatisfactory examination rating. If a depository institution fails to meet regulatory capital requirements specified in the FDICIA, regulatory agencies can require submission and funding of a capital restoration plan by the bank holding company controlling such institution, place limits on the asset growth and restrict activities of the institution, including transactions with affiliates, require the institution to raise additional capital or to be acquired and, ultimately, require the appointment of a receiver. The obligation of a controlling bank holding company under the FDICIA to fund a capital restoration plan is limited to the lower of 5% of an undercapitalized bank subsidiary's assets or the amount required to meet regulatory capital requirements. Federal banking agencies may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized. If the controlling bank holding company fails to fulfill its obligations under the FDICIA and files (or has filed 4 25 against it) a petition under the federal Bankruptcy Code, the applicable regulatory agency would have a claim as a general creditor of the bank holding company and, if the capital restoration plan were deemed to be a commitment to maintain capital under the federal Bankruptcy Code, the claim would be entitled to a priority in such bankruptcy proceeding over third party creditors of the bank holding company including holders of the Debt Securities or Warrants offered hereby. Each of Fleet's subsidiary depository institutions meets all applicable regulatory capital requirements at September 30, 1992. In addition, under the FDICIA, an insured depository institution may not pay management fees to any person having control of the institution nor may an institution, except under certain circumstances and with prior regulatory approval, make any capital distribution if, after making such payment or distribution, the institution would be undercapitalized. Further, effective December 19, 1993, undercapitalized depository institutions will be subject to restrictions on borrowing from the Federal Reserve System. Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator. Under the FDICIA, a depository institution that is not well-capitalized is generally prohibited from accepting brokered deposits and offering interest rates on deposits "significantly higher" than the prevailing rate in its market. Under the FDIC's final regulations for brokered deposits adopted in May 1992, a bank will be considered well-capitalized if its capital ratios are at least 200 basis points above the regulatory minimum and if certain other conditions are satisfied. In addition, "pass-through" insurance coverage may not be available for certain employee benefit accounts. In Fleet's opinion, the application of these limitations would not have a material effect on Fleet. FDICIA directs that each federal banking agency prescribe standards for depository institutions and depository institution holding companies relating to internal controls, information systems, internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, a maximum ratio of classified assets to capital, minimum earnings sufficient to absorb losses, a minimum ratio of market value to book value for publicly traded shares and such other standards as the agency deems appropriate. The ultimate effect of these standards cannot be ascertained until final regulations are adopted. FDICIA also contains a variety of other provisions that may affect Fleet's operations, including new reporting requirements, regulatory standards for real estate lending, "truth in savings" provisions, and the requirement that a depository institution give 90 days' prior notice to customers and regulatory authorities before closing any branch. Many of the provisions in the FDICIA will be implemented through the adoption of regulations by the various federal banking agencies and, therefore, the precise impact on Fleet cannot be assessed at this time. The ability of holders of debt and equity securities of Fleet, including the holders of the Debt Securities and Warrants offered hereby, to benefit from the distribution of assets of any subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to prior claims of creditors of the subsidiary except to the extent that a claim of Fleet as a creditor may be recognized. The principal office of Fleet is located at 50 Kennedy Plaza, Providence, Rhode Island 02903, telephone number (401) 278-5800. 5 26 CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES Fleet's consolidated ratios of earnings to fixed charges were as follows for the years and periods indicated:
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED -------------------------------- SEPTEMBER 30, 1992 1991 1990 1989 1988 1987 ------------------ ---- ---- ---- ---- ---- Excluding Interest on Deposits................... 2.18x 1.32x * 1.93x 2.15x 1.72x Including Interest on Deposits................... 1.31 1.08 * 1.29 1.34 1.22 - --------------- * Fixed charges exceeded earnings by $163.3 million (excluding interest on deposits) and by $163.3 million (including interest on deposits) for the year ended December 31, 1990.
For purposes of computing the consolidated ratios, earnings consist of income before income taxes plus fixed charges (excluding capitalized interest). Fixed charges consist of interest on short-term debt and long-term debt (including interest related to capitalized leases, capitalized interest and capitalized debt issuance expense) and one-third of rent expense, which approximates the interest component of such expense. In addition, where indicated, fixed charges include interest on deposits. USE OF PROCEEDS Unless otherwise indicated in the applicable Prospectus Supplement, Fleet intends to use the net proceeds from the sale of the Debt Securities and Warrants for general corporate purposes, principally to extend credit to, or fund investments in, its subsidiaries. The precise amounts and timing of extensions of credit to, and investments in, such subsidiaries will depend upon the subsidiaries' funding requirements and the availability of other funds. Pending such applications, the net proceeds may be temporarily invested in marketable securities or applied to the reduction of Fleet's short-term indebtedness. Based upon the historic and anticipated future growth of Fleet and the financial needs of its subsidiaries, Fleet may engage in additional financings of a character and amount to be determined as the need arises. DESCRIPTION OF DEBT SECURITIES The Debt Securities will constitute either Senior Securities or Subordinated Securities of Fleet. The Senior Securities will be issued under an indenture dated as of October 1, 1992 (the "Senior Indenture"), between Fleet and The First National Bank of Chicago as Senior Trustee (the "Senior Trustee"). The Subordinated Securities will be issued under an indenture dated as of October 1, 1992 (as supplemented by a First Supplemental Indenture dated November 30, 1992, the "Subordinated Indenture"), between Fleet and The First National Bank of Chicago as Subordinated Trustee (the "Subordinated Trustee"). The Senior Indenture and Subordinated Indenture are collectively referred to herein as the "Indentures." A copy of each of the Indentures are exhibits to the Registration Statement of which this Prospectus forms a part. The following description of Debt Securities relates to Debt Securities to be issued in connection with either a United States Offering or an International Offering, except, in the case of an International Offering, as otherwise specified in the Prospectus Supplement relating thereto. The following summaries of certain provisions of the Indentures do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Indentures, including the definitions therein of certain terms. Wherever particular Sections or defined terms of the Indentures are referred to, it is intended that such Sections or definitions shall be incorporated herein by reference. The following sets forth certain general terms and provisions of the Debt Securities to which any Prospectus Supplement may relate. The particular terms of the Debt Securities offered by any Prospectus Supplement (the "Offered Securities") and the extent, if any, to which such general provisions may apply to the Debt Securities so offered, will be described in the Prospectus Supplement relating to such Offered Securities. Because Fleet is a holding company, its rights and the rights of its creditors, including the Holders of the Debt Securities offered hereby, to participate in the assets of any subsidiary upon the latter's liquidation or 6 27 reorganization will be subject to the prior claims of the subsidiary's creditors except to the extent that Fleet may itself be a creditor with recognized claims against the subsidiary. GENERAL The Debt Securities to be offered by this Prospectus are limited to $1,031,900,000 in aggregate principal amount. Fleet expects from time to time to incur additional indebtedness constituting Senior Indebtedness and Other Financial Obligations (each as defined in the Subordinated Indenture). The Indentures, however, do not limit the aggregate principal amount of Debt Securities which may be issued thereunder and provide that Debt Securities may be issued from time to time in one or more series. The Debt Securities will be unsecured obligations of Fleet. Neither the Indentures nor the Debt Securities will limit or otherwise restrict the amount of other indebtedness (including Other Financial Obligations) which may be incurred or other securities which may be issued by Fleet or any of its subsidiaries. The Senior Securities will rank on a parity with all other unsecured unsubordinated indebtedness of Fleet while the indebtedness represented by the Subordinated Securities will be subordinated as described below under "Subordinated Securities". Reference is made to the Prospectus Supplement relating to the particular series of Debt Securities offered thereby for the following terms, where applicable, of the Offered Securities in respect of which this Prospectus is being delivered: (1) the title of the Offered Securities; (2) the limit, if any, on the aggregate principal amount or initial public offering price of the Offered Securities; (3) the priority of payment of such Offered Securities; (4) the price or prices (which may be expressed as a percentage of the aggregate principal amount thereof) at which the Offered Securities will be issued; (5) the date or dates on which the Offered Securities will mature; (6) the rate or rates (which may be fixed or variable) per annum at which the Offered Securities will bear interest, if any, or the method of determining the same; (7) the date from which such interest, if any, on the Offered Securities will accrue, the date or dates on which such interest, if any, will be payable, the date on which payment of such interest, if any, will commence and the Regular Record Dates for such Interest Payment Dates, if any; (8) the extent to which any of the Offered Securities will be issuable in temporary or permanent global form and, if so, the identity of the depositary for such global Offered Security, or the manner in which any interest payable on a temporary or permanent global Offered Security will be paid; (9) the dates, if any, on which, and the price or prices at which, the Offered Securities will, pursuant to any mandatory sinking fund provisions, or may, pursuant to any optional sinking fund or to any purchase fund provisions, be redeemed by Fleet, and the other detailed terms and provisions of such sinking and/or purchase funds; (10) the date, if any, after which, and the price or prices at which, the Offered Securities may, pursuant to any optional redemption provisions, be redeemed at the option of Fleet or of the Holder thereof and the other detailed terms and provisions of such optional redemption; (11) the denomination or denominations in which such Offered Securities are authorized to be issued; (12) the currency, currencies or units (including ECU) in which the Offered Securities are denominated, which may be in United States dollars, a foreign currency or units of two or more foreign currencies; (13) the currency, currencies or units (including ECU) for which the Offered Securities may be purchased and in which principal, premium, if any, and interest may be payable; (14) whether any of the Offered Securities will be issued in bearer form and, if so, any limitations on issuance of such bearer Offered Securities (including exchange for registered Offered Securities of the same series); (15) information with respect to book-entry procedures; (16) whether any of the Offered Securities will be issued as Original Issue Discount Securities; (17) any index used to determine the amount of payments of principal of, premium, if any, and interest on such Offered Securities; (18) each office or agency where, subject to the terms of the applicable Indenture, such Offered Securities may be presented for registration of transfer or exchange; (19) whether any of the Offered Securities will be subject to defeasance in advance of the Redemption Date or Stated Maturity thereof; (20) whether the subordination provisions summarized below or different subordination provisions, including a different definition of "Senior Indebtedness", "Entitled Persons", "Existing Subordinated Indebtedness" or "Other Financial Obligations", shall apply to the Offered Securities; and (21) any other terms of the series (which will not be inconsistent with the provisions of the applicable Indenture). Special federal income tax and other considerations relating to Debt Securities denominated in foreign currencies or units of two or more foreign currencies will be described in the applicable Prospectus 7 28 Supplement. In the event Fleet offers Debt Securities denominated in foreign currencies or units of two or more foreign currencies, an opinion with respect to tax matters and consent of counsel will be filed in a Form 8-K or as an amendment to the Registration Statement of which this Prospectus forms a part. Debt Securities may be issued as Original Issue Discount Securities (bearing no interest or interest at a rate which at the time of issuance is below market rates) to be sold at a substantial discount below their principal amount. In the event of an acceleration of the maturity of any Original Issue Discount Security, the amount payable to the Holder of such Original Issue Discount Security upon such acceleration will be determined in accordance with the applicable Prospectus Supplement, the terms of such security and the relevant Indenture, but will be an amount less than the amount payable at the maturity of the principal of such Original Issue Discount Security. Special federal income tax and other considerations relating thereto will be described in the applicable Prospectus Supplement. REGISTRATION AND TRANSFER Unless otherwise indicated in the applicable Prospectus Supplement, each series of Debt Securities will be issued in registered form only, without coupons. The Indentures, however, provide that Fleet may also issue Debt Securities in bearer form only, or in both registered and bearer form. Debt Securities issued in bearer form shall have interest coupons attached, unless issued as zero coupon securities. Debt Securities in bearer form shall not be offered, sold, resold or delivered in connection with their original issuance in the United States or to any United States person (as defined below) other than offices located outside the United States of certain United States financial institutions. As used above, "United States person" means any citizen or resident of the United States, any corporation, partnership or other entity created or organized in or under the laws of the United States, or any estate or trust, the income of which is subject to United States federal income taxation regardless of its source, and "United States" means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction. Purchasers of Debt Securities in bearer form will be subject to certification procedures and may be affected by certain limitations under United States tax laws. Such procedures and limitations will be described in the Prospectus Supplement relating to the offering of the Debt Securities in bearer form. Debt Securities in registered form may be presented for transfer or exchange (with form of transfer duly endorsed thereon) for other Debt Securities of the same series at the offices of the Trustee according to the terms of the applicable Indenture. In no event, however, will Debt Securities in registered form be exchangeable for Debt Securities in bearer form. Fleet may designate the main office of Fleet Bank-RI, 111 Westminster Street, Providence, Rhode Island 02903, as an office where the transfer of the Debt Securities may be registered. Unless otherwise indicated in the applicable Prospectus Supplement, Debt Securities issued in bearer form will be issued in denominations of $10,000 and $50,000. Unless otherwise indicated in the applicable Prospectus Supplement, the Debt Securities issued in fully registered form will be issued without coupons and in denominations of $1,000 or integral multiples thereof. No service charge will be made for any transfer or exchange of the Debt Securities but Fleet may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. PAYMENT AND PLACE OF PAYMENT Unless otherwise indicated in the applicable Prospectus Supplement, payment of principal of, premium, if any, and interest, if any, on, Debt Securities in registered form will be made at the office of the Trustee, except that at the option of Fleet, interest may be paid by mailing a check to the address of the person entitled thereto as it appears on the Security Register (Sections 301, 305, 1002). Fleet may designate the main office of Fleet Bank-RI, 111 Westminster Street, Providence, Rhode Island 02903, as an office where principal, premium, if any, and interest, if any, may be paid. Unless otherwise indicated in the applicable Prospectus Supplement, payment of principal of, premium, if any, and interest, if any, on Debt Securities in bearer form will be made, subject to any applicable laws and 8 29 regulations, at such office outside the United States as specified in the applicable Prospectus Supplement and as Fleet may designate from time to time, at the option of the Holder, by check or by transfer to an account maintained by the payee with a bank located outside the United States. Unless otherwise indicated in the applicable Prospectus Supplement, payment of interest on Debt Securities in bearer form will be made only against surrender of the coupon relating to such Interest Payment Date. No payment with respect to any Debt Security in bearer form will be made at any office or agency of Fleet in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States. GLOBAL SECURITIES The Debt Securities of a series may be issued in whole or in part in the form of one or more global securities ("Global Securities") that will be deposited with, or on behalf of, a depository (the "Depository") identified in the Prospectus Supplement relating to such series. Global Securities may be issued in either registered or bearer form and in either temporary or permanent form. Unless and until it is exchanged in whole or in part for individual certificates evidencing Debt Securities in definitive form represented thereby, a Global Security may not be transferred except as a whole by the Depository for such Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository or by such Depository or any such nominee to a successor of such Depository or a nominee of such successor. The specific terms of the depositary arrangement with respect to any Debt Securities of a series will be described in the Prospectus Supplement relating to such series. Fleet anticipates that the following provisions will generally apply to all depositary arrangements although no assurance can be given that such will be the case. Upon the issuance of a Global Security, the Depository for such Global Security or its nominee will credit, on its book-entry registration and transfer system, the respective principal amounts of the Debt Securities represented by such Global Security to the accounts of institutions that have accounts with such Depository ("participants"). The accounts to be credited shall be designated by the underwriters or agents of such Debt Securities or by Fleet, if such Debt Securities are offered and sold directly by Fleet. Ownership of beneficial interests in a Global Security will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in such Global Security will be shown on, and the transfer of that ownership will be effected only through, records maintained by the Depository or its nominee for such Global Security (with respect to interests of participants) and the records of participants (with respect to persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depository for a Global Security, or its nominee, is the owner of such Global Security, such Depository or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Global Security for all purposes under the Indenture governing such Debt Securities. Except as set forth below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities of such series in definitive form and will not be considered the owners or holders thereof under the Indenture governing such Debt Securities. Subject to the restrictions discussed under "Description of Debt Securities -- Registration and Transfer", payment of principal of, premium, if any, and interest, if any, on, Debt Securities registered in the name of or held by a Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner or the holder of the Global Security representing such Debt Securities. None of Fleet, the Trustee for such Debt Securities, or any paying agent or the Security Registrar for such Debt Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security for such Debt Securities or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 9 30 Fleet expects that the Depository for Debt Securities of a series, upon receipt of any payment of principal, premium, if any, or any interest in respect of a permanent Global Security, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Security as shown on the records of such Depository or its nominee. Fleet also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. Receipt by owners of beneficial interests in a temporary Global Security of payments in respect of such temporary Global Security will be subject to the restrictions discussed under "Description of Debt Securities -- Registration and Transfer" above. If the Depository for Debt Securities of a series is at any time unwilling, unable or ineligible to continue as Depository and a successor depositary is not appointed by Fleet within ninety days, Fleet will issue Debt Securities of such series in definitive form in exchange for the Global Security or Securities representing the Debt Securities of such series. In addition, Fleet may at any time and in its sole discretion, subject to any limitations described in the Prospectus Supplement relating to such Debt Securities, determine not to have any Debt Securities of a series represented by one or more Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for the Global Security or Securities representing such Debt Securities. Further, if Fleet so specifies with respect to the Debt Securities of a series, an owner of a beneficial interest in a Global Security representing Debt Securities of such series may, on terms acceptable to Fleet and the Depository for such Global Security, receive Debt Securities of such series in definitive form in exchange for such beneficial interests, subject to any limitations described in the Prospectus Supplement relating to such Debt Securities. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery in definitive form of Debt Securities of the series represented by such Global Security equal in principal amount to such beneficial interest and to have such Debt Securities registered in its name (if the Debt Securities of such series are issuable as Registered Securities). Debt Securities of such series so issued in definitive form will be issued (a) as Registered Securities in denominations, unless otherwise specified by Fleet, of $1,000 or integral multiplies thereof if the Debt Securities of such series are issuable as Registered Securities, (b) as Bearer Securities in denominations, unless otherwise specified by Fleet, of $10,000 and $50,000 if the Debt Securities of such series are issuable as Bearer Securities or (c) as either Registered or Bearer Securities, if the Debt Securities of such series are issuable in either form. MODIFICATION AND WAIVER Each Indenture provides that modifications and amendments thereof may be made by Fleet and the Trustees with the consent of the Holders of 66% in aggregate principal amount of the Outstanding Securities of each series under such Indenture affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holder of each Outstanding Security affected thereby, (a) change the stated maturity date of the principal of, or any installment of principal or interest on, any Outstanding Security, (b) reduce the principal amount of, the rate of interest thereon, or any premium payable upon the redemption thereof, (c) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the maturity thereof, (d) change the place or currency of payment of principal of, or any premium or interest on, any Outstanding Security, (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Outstanding Security, or (f) reduce the percentage in principal amount of Outstanding Securities of any series, the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. The Holders of 50% in aggregate principal amount of the Outstanding Securities of each series may, on behalf of all Holders of Debt Securities of that series, waive, insofar as that series is concerned, compliance by Fleet with certain restrictive provisions of the applicable Indenture. The Holders of a majority in aggregate principal amount of the Outstanding Securities of each series may, on behalf of all Holders of Debt Securities of that series, waive any past default under the applicable Indenture with respect to Debt Securities of that series, except a default in the payment of principal or any premium or any interest or in respect of a provision 10 31 which under the applicable Indenture cannot be modified or amended without the consent of the Holder of each Outstanding Security of that series affected. Modification and amendment of the Indentures may be made by Fleet and the Trustee without the consent of any Holder for any of the following purposes: (i) to evidence the succession of another Person to Fleet; (ii) to add to the covenants of Fleet for the benefit of the Holders of all or any series of Securities; (iii) to add Events of Default; (iv) to add or change any provisions of any of the Indentures to facilitate the issuance of bearer securities; (v) to change or eliminate any of the provisions of the applicable Indenture, provided that any such change or elimination shall become effective only when there is no Outstanding Security of any series which is entitled to the benefit of such provision; (vi) to establish the form or terms of Securities of any series; (vii) to evidence and provide for the acceptance of appointment by a successor Trustee; (viii) to cure any ambiguity, to correct or supplement any provision in the applicable Indenture, or to make any other provisions with respect to matters or questions arising under such Indenture, provided such action shall not adversely affect the interests of Holders of Debt Securities of any series in any material respect under such Indenture; (ix) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or (x) to provide for conversion rights of the Holders of the Securities of any series to enable such Holders to convert such Securities into other securities of Fleet. CONSOLIDATION, MERGER AND SALE OF ASSETS Unless otherwise set forth in the applicable Prospectus Supplement, each Indenture provides that Fleet may consolidate or merge with or into, or transfer its assets substantially as an entirety to, any corporation organized under the laws of any domestic jurisdiction, provided that the successor corporation assumes Fleet's obligations on the Debt Securities under such Indenture, and that after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing, and that certain other conditions are met. Neither Indenture provides for any right of acceleration in the event of a consolidation, merger, sale of all or substantially all of the assets, recapitalization or change in stock ownership of Fleet. In addition, the Indentures do not contain any provision which would protect the Holders of Debt Securities against a sudden and dramatic decline in credit quality resulting from takeovers, recapitalizations or similar restructurings. REGARDING THE TRUSTEE Fleet maintains banking relations with the Trustee. In addition, Fleet's banking subsidiaries maintain deposit accounts and correspondent banking relations with the Trustee. INTERNATIONAL OFFERING If specified in the applicable Prospectus Supplement, Fleet may issue Debt Securities in an International Offering. Such Debt Securities may be issued in bearer form and will be described in the applicable Prospectus Supplement. If such Debt Securities are Senior Securities, such Debt Securities will be issued pursuant to a supplement to the Senior Indenture. If Debt Securities are issued in bearer form, the applicable Prospectus Supplement will contain the relevant provisions. In connection with any such International Offering, Fleet will designate paying agents, registrars or other agents with respect to the Debt Securities, as specified in the applicable Prospectus Supplement. Debt Securities issued in an International Offering may be subject to certain selling restrictions which will be described in the applicable Prospectus Supplement. Such Debt Securities may be listed on one or more foreign stock exchanges as described in the applicable Prospectus Supplement. Special United States tax and other considerations, if any, applicable to an International Offering will be described in the applicable Prospectus Supplement. 11 32 SENIOR SECURITIES The Senior Securities will be direct, unsecured obligations of Fleet and will rank pari passu with all outstanding senior indebtedness of Fleet. EVENTS OF DEFAULT The following are Events of Default under the Senior Indenture with respect to Senior Securities of any series: (a) failure to pay principal of or any premium on any Senior Security of that series when due; (b) failure to pay any interest on any Senior Security of that series when due, continued for 30 days; (c) failure to deposit any sinking fund payment, when due, in respect of any Senior Security of that series; (d) failure to perform any other covenant of Fleet in the Senior Indenture (other than any covenant included in the Indenture solely for the benefit of Series of Debt Securities other than that Series), continued for 60 days after written notice as provided in the Senior Indenture; (e) certain events in bankruptcy, insolvency or reorganization; and (f) any other Event of Default provided with respect to Senior Securities of that series. (Section 501) If an Event of Default with respect to Senior Securities of any series at the time outstanding occurs and is continuing, either the Senior Trustee or the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series may declare the principal amount (or, if the Senior Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all the Senior Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Senior Securities of any series has been made, but before a judgment or decree based on acceleration has been obtained, the Holders of a majority in aggregate principal amount of Outstanding Securities of that series may, on behalf of all Holders of that series, under certain circumstances, rescind and annul such acceleration. (Section 502) The Senior Indenture provides that, subject to the duty of the Senior Trustee during default to act with the required standard of care, the Senior Trustee will be under no obligation to exercise any of its rights or powers under the Senior Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Senior Trustee reasonable indemnity. (Section 603) Subject to such provisions for the indemnification of the Senior Trustee, the Holders of a majority in aggregate principal amount of the Outstanding Senior Securities of any series will have the right to direct the time, method and place of conducting any proceedings for any remedy available to the Senior Trustee, or exercising any trust or power conferred on the Senior Trustee, with respect to the Senior Securities of that series. (Section 512) No Holder of any Senior Security of any series will have any right to institute any proceeding with respect to the Senior Indenture or for any remedy thereunder, unless (a) such Holder shall have previously given to the Senior Trustee written notice of a continuing Event of Default with respect to Senior Securities of that series, (b) the Holders of not less than 25% in aggregate principal amount of the Outstanding Senior Securities of that series also shall have made written request and offered reasonable indemnity to the Senior Trustee to institute such proceeding as trustee, (c) the Senior Trustee shall not have received from the Holders of a majority in principal amount of the Outstanding Senior Securities of that series a direction inconsistent with such request and (d) the Senior Trustee shall have failed to institute such proceeding within 60 days. (Section 507) However, the Holder of any Senior Security will have an absolute right to receive payment of the principal of (and premium, if any) and interest, if any, on such Senior Security on or after the due dates expressed in such Senior Security and to institute suit for the enforcement of any such payment. (Section 508) Fleet is required to furnish to the Senior Trustee annually a statement as to performance by Fleet of certain of its obligations under the Indenture and as to any default in such performance. (Section 1009) RESTRICTIVE COVENANTS Disposition of Voting Stock of Certain Subsidiaries. The senior indenture contains a covenant that Fleet will not, and will not permit any Subsidiary (as defined in each Indenture) to sell, assign, pledge, transfer or otherwise dispose of, or permit the issuance of any shares of Voting Stock (as defined in the Senior Indenture) of, or any securities convertible into, or options, warrants or rights to subscribe for or purchase shares of Voting 12 33 Stock of, a Principal Constituent Bank (as defined below) or any Subsidiary which owns shares of, or securities convertible into, or options, warrants or rights to subscribe for or purchase shares of Voting Stock of a Principal Constituent Bank, provided that dispositions made by Fleet or any Subsidiary (i) acting in a fiduciary capacity for any person other than Fleet or any Subsidiary or (ii) to Fleet or any of its wholly-owned (except for directors' qualifying shares) Subsidiaries shall not be prohibited. Notwithstanding the limitations described above, the Senior Indenture provides that Fleet may, and may permit its Subsidiaries to, sell, assign, pledge, transfer or otherwise dispose of, or issue such shares or securities (1) if required by law for the qualification of Directors, (2) for purposes of compliance with an order of a court or regulatory authority, (3) if in connection with a merger of, or consolidation of, a Principal Constituent Bank with or into a wholly-owned Subsidiary or a Constituent Bank (as defined below), provided that Fleet holds, directly or indirectly, in the entity surviving such merger or consolidation, not less than the percentage of Voting Stock it held in the Principal Constituent Bank prior to such action, (4) if such disposition or issuance is for fair market value (determined by the Board of Directors of Fleet) and, if after giving effect to such disposition or issuance (and any potential dilution), Fleet and its wholly-owned Subsidiaries will own directly not less than 80% of the Voting Stock of such Principal Constituent Bank or Subsidiary, (5) if a Principal Constituent Bank sells additional shares of Voting Stock to its stockholders at any price, if, after such sale, Fleet holds directly or indirectly not less than the percentage of Voting Stock of such Principal Constituent Bank it owned prior to such sale or (6) if Fleet or a Subsidiary pledges or creates a lien on the Voting Stock of a Principal Constituent Bank to secure a loan or other extension of credit by a Constituent Bank subject to Section 23A of the Federal Reserve Act. A "Constituent Bank" is a Bank which is a Subsidiary. A "Principal Constituent Bank" is Fleet Bank-RI and any other Constituent Bank designated as a Principal Constituent Bank. Any designation of a Constituent Bank as a Principal Constituent Bank with respect to Debt Securities of any series shall remain effective until the Debt Securities of such series are no longer outstanding. As of the date of this Prospectus, no Constituent Banks (other than Fleet Bank-RI) have been designated as Principal Constituent Banks with respect to any series of Debt Securities. Limitation Upon Liens on Certain Capital Stock. The Senior Indenture contains a covenant that Fleet will not at any time, directly or indirectly, create, assume, incur or suffer to be created, assumed or incurred or to exist any mortgage, pledge, encumbrance or lien or charge of any kind upon (1) any shares of capital stock of any Principal Constituent Bank (other than directors' qualifying shares), or (2) any shares of capital stock of a Subsidiary which owns capital stock of any Principal Constituent Bank; provided, however, that, notwithstanding the foregoing, Fleet may incur or suffer to be incurred or to exist upon such capital stock (a) liens for taxes, assessments or other governmental charges or levies which are not yet due or are payable without penalty or of which the amount, applicability or validity is being contested by Fleet in good faith by appropriate proceedings and Fleet shall have set aside on its books adequate reserves with respect thereto or (b) the lien of any judgement, if such judgment shall not have remained undischarged, or unstayed on appeal or otherwise, for more than 60 days. DEFEASANCE Fleet may terminate certain of its obligations under the Senior Indenture with respect to the Senior Securities of any series on the terms and subject to the conditions contained in the Senior Indenture, by (a) depositing irrevocably with the Senior Trustee as trust funds in trust (i) in the case of Senior Securities denominated in a foreign currency, money in such foreign currency or Foreign Government Obligations (as defined below) of the foreign government or governments issuing such foreign currency, or (ii) in the case of Senior Securities denominated in U.S. dollars, U.S. dollars or U.S. Government Obligations (as defined below), in each case in an amount which through the payment of interest, principal or premium, if any, in respect thereof in accordance with their terms will provide (without any reinvestment of such interest, principal or premium), not later than one business day before the due date of any payment, money or (iii) a combination of money and U.S. Government Obligations or Foreign Government Obligations, as applicable, sufficient to pay the principal of or premium, if any, and interest on, the Senior Securities of such series as such are due and (b) satisfying certain other conditions precedent specified in the Senior Indenture. Such deposit and termination is conditioned among other things upon Fleet's delivery of (a) an opinion of independent counsel that the Holders of the Senior Securities of such series will have no federal income tax 13 34 consequences as a result of such deposit and termination and (b) if the Senior Securities of such series are then listed on the New York Stock Exchange, an opinion of counsel that the Senior Securities of such series will not be delisted as a result of the exercise of this option. Such termination will not relieve Fleet of its obligation to pay when due the principal of, and interest on, the Senior Securities of such series if the Senior Securities of such series are not paid from the money, Foreign Government Obligations or U.S. Government Obligations held by the Senior Trustee for payment thereof. (Section 403) "U.S. Government Obligations" means securities that are (i) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, under clauses (i) or (ii) are not callable or redeemable at the option of the issuer thereof. "Foreign Government Obligations" means securities denominated in a Foreign Currency that are (i) direct obligations of a foreign government for the payment of which its full faith and credit is pledged or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of a foreign government the payment of which is unconditionally guaranteed as a full faith and credit obligation by such foreign government, which, in either case, under clauses (i) or (ii) are not callable or redeemable at the option of the issuer thereof. SUBORDINATED SECURITIES The Subordinated Securities will be direct, unsecured obligations of Fleet and, unless otherwise specified in the applicable Prospectus Supplement, will rank pari passu with all outstanding subordinated indebtedness of Fleet. SUBORDINATION The payment of the principal of and interest on the Subordinated Securities will, to the extent set forth in the Subordinated Indenture, be subordinated in right of payment to the prior payment in full of all Senior Indebtedness (as defined in the Subordinated Indenture). In certain events of insolvency, the payment of the principal of and interest on the Subordinated Securities will, to the extent set forth in the Subordinated Indenture, also be effectively subordinated in right of payment to the prior payment in full of all Other Financial Obligations (as defined in the Subordinated Indenture). Upon any payment or distribution of assets to creditors upon any liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors, marshalling of assets or any bankruptcy, insolvency or similar proceedings of the Company, the holders of all Senior Indebtedness will first be entitled to receive payment in full of all amounts due or to become due thereon before the Holders of the Subordinated Securities will be entitled to receive any payment in respect of the principal of or interest on the Subordinated Securities. If upon any such payment or distribution of assets to creditors, there remain, after giving effect to such subordination provisions in favor of the holders of Senior Indebtedness, any amounts of cash, property or securities available for payment or distribution in respect of Subordinated Securities (as defined in the Subordinated Indenture, "Excess Proceeds") and if, at such time, any Entitled Persons (as defined in the Subordinated Indenture) in respect of Other Financial Obligations have not received payment in full of all amounts due or to become due on or in respect of such Other Financial Obligations, then such Excess Proceeds shall first be applied to pay or provide for the payment in full of such Other Financial Obligations before any payment or distribution may be made in respect of the Subordinated Securities. In the event of the acceleration of the maturity of any Debt Securities, the holders of all Senior Indebtedness will first be entitled to receive payment in full of all amounts due thereon before the Holders of the Subordinated Securities will be entitled to receive any payment upon the principal of or interest on the Subordinated Securities. In addition, no payment may be made of the principal of, premium, if any, or interest on the Subordinated Securities, or in respect of any redemption, retirement, purchase or other acquisition of any of the Subordinated Securities, at any time when (i) there is a default in the payment of the principal of, premium, if any, interest on or otherwise in respect of any Senior Indebtedness, whether at maturity or at a 14 35 date fixed for prepayment or by declaration or otherwise, or (ii) any event of default with respect to any Senior Indebtedness has occurred and is continuing, or would occur as a result of such payment on the Subordinated Securities or any redemption, retirement, purchase or other acquisition of any of the Subordinated Securities, permitting the Holders of such Senior Indebtedness (or a trustee on behalf of the Holders thereof) to accelerate the maturity thereof. By reason of such subordination in favor of the holders of Senior Indebtedness, in the event of insolvency, creditors of Fleet who are not holders of Senior Indebtedness or of the Subordinated Securities may recover less, ratably, than Holders of Senior Indebtedness and may recover more, ratably, than the Holders of the Subordinated Securities. By reason of the obligation of the Holders of Subordinated Securities to pay over any Excess Proceeds to Entitled Persons in respect of Other Financial Obligations, in the event of insolvency, holders of Existing Subordinated Indebtedness (as defined in the Subordinated Indenture) may recover more, ratably, than the Holders of Subordinated Debt Securities. Unless otherwise specified in the Prospectus Supplement relating to the particular series of Subordinated Securities offered thereby, Senior Indebtedness is defined in the Subordinated Indenture as (a) the principal of, premium, if any, and interest on all of Fleet's indebtedness for money borrowed, whether outstanding on the date of execution of the Subordinated Indenture or thereafter created, assumed or incurred, except (i) the Existing Subordinated Indebtedness, (ii) such indebtedness as is by its terms expressly stated to be junior in right of payment to the Subordinated Debt Securities and (iii) such indebtedness as is by its terms expressly stated to rank pari passu with the Subordinated Debt Securities and (b) any deferrals, renewals or extensions of any such Senior Indebtedness. (Section 1.01). The term "indebtedness for money borrowed" when used with respect to Fleet is defined to include, without limitation, any obligation of, or any obligation guaranteed by, Fleet for the repayment of borrowed money, whether or not evidenced by bonds, debentures, notes or other written instruments, and any deferred obligation of, or any such obligation guaranteed by, Fleet for the payment of the purchase price of property or assets. (Section 1.01). Unless otherwise specified in the Prospectus Supplement relating to the particular series of Subordinated Securities offered thereby, Existing Subordinated Indebtedness means Fleet's Subordinated Notes Due 1983-1997, Floating Rate Subordinated Notes Due 1996, Floating Rate Subordinated Capital Notes Due 1997, Floating Rate Subordinated Capital Notes Due 1998, 9.90% Subordinated Notes Due 2001, 9% Subordinated Notes Due 2001, 8% Subordinated Notes Due 2004 and 8% Subordinated Notes Due 2007. Unless otherwise specified in the Prospectus Supplement relating to the particular series of Subordinated Securities offered thereby, Other Financial Obligations means all obligations of Fleet to make payment pursuant to the terms of financial instruments, such as (i) securities contracts and foreign currency exchange contracts, (ii) derivative instruments, such as swap agreements (including interest rate and foreign exchange rate swap agreements), cap agreements, floor agreements, collar agreements, interest rate agreements, foreign exchange rate agreements, options, commodity futures contracts, commodity option contracts and (iii) in the case of both (i) and (ii) above, similar financial instruments, other than (A) obligations on account of Senior Indebtedness and (B) obligations on account of indebtedness for money borrowed ranking pari passu with or subordinate to the Subordinated Securities. Unless otherwise specified in the Prospectus Supplement relating to the particular series of Subordinated Securities offered thereby, Entitled Persons means any person who is entitled to payment pursuant to the terms of Other Financial Obligations. Indebtedness of Fleet senior to the Subordinated Securities, at September 30, 1992, totalled approximately $1.8 billion. Fleet's obligations under the Subordinated Securities shall rank pari passu in right of payment with each other and with the Existing Subordinated Indebtedness, subject to the obligations of the Holders of Subordinated Securities to pay over any Excess Proceeds to Entitled Persons in respect of Other Financial Obligations as provided in the Subordinated Indenture. The Subordinated Indenture does not limit or prohibit the incurrence of additional Senior Indebtedness or Other Financial Obligations, which may include indebtedness that is senior to the Subordinated Securities, but subordinate to other obligations of Fleet. 15 36 The Prospectus Supplement may further describe the provisions, if any, applicable to the subordination of the Subordinated Securities of a particular series. Except as described above or in the Subordinated Indenture, the obligation of Fleet to make payment of the principal of, premium, if any, or interest on the Subordinated Securities will not be affected by reason of such subordination. In the event of a distribution of assets upon any dissolution, winding up, liquidation or reorganization, certain general creditors of Fleet may recover more, ratably, than Holders of the Subordinated Securities. Subject to payment in full of all Senior Indebtedness, the rights of the Holders of Subordinated Securities will be subrogated to the rights of the Holders of Senior Indebtedness to receive payments or distribution of cash, property or securities of Fleet applicable to Senior Indebtedness. Subject to the payment in full of all Other Financial Obligations, the rights of the Holders of Subordinated Securities will be subrogated to the rights of Entitled Persons to receive payments or distributions of cash, property or securities of Fleet applicable to Other Financial Obligations. (Sections 14.02 and 14.10) LIMITED RIGHTS OF ACCELERATION Unless otherwise specified in the Prospectus Supplement relating to any series of Subordinated Securities, payment of principal of the Subordinated Securities may be accelerated only in case of certain events involving the bankruptcy or reorganization of Fleet which constitutes an Event of Default (as defined below). There is no right of acceleration in the case of a default in the payment of principal of, premium, if any, or interest on the Subordinated Securities or the performance of any other covenant of Fleet in the Subordinated Indenture. RESTRICTIVE COVENANTS The Prospectus Supplement relating to a series of Subordinated Securities may describe certain restrictive covenants, if any, to which Fleet may be bound under the Subordinated Indenture. EVENTS OF DEFAULT, DEFAULTS, WAIVERS An "Event of Default" with respect to Subordinated Securities of any series is defined in the Subordinated Indenture as certain events involving the bankruptcy or reorganization of Fleet and any other Event of Default provided with respect to Subordinated Securities of such series. (Section 7.01) A "Default" with respect to Subordinated Securities of any series is defined in the Subordinated Indenture as (a) an Event of Default with respect to such series; (b) failure to pay the principal of, or premium, if any, on any Subordinated Security of such series at its Maturity; (c) failure to pay interest upon any Subordinated Security of such series when due and payable and the continuance of such Default for a period of 30 days; (d) failure to perform any other covenant or agreement of Fleet in the Subordinated Indenture with respect to Subordinated Securities of such series and continuance of such Default for 60 days after written notice of such failure, requiring the Company to remedy the same; and (e) any other Default provided with respect to Subordinated Securities of such series. (Section 7.07) If an Event of Default with respect to any series of Subordinated Securities for which there are Subordinated Securities outstanding under the Subordinated Indenture occurs and is continuing, either the Subordinated Trustee or the Holders of not less than 25% in aggregate principal amount of the Subordinated Securities of such series may declare the principal amount (or if such Subordinated Securities are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of all Subordinated Securities of that series to be immediately due and payable. The Holders of a majority in aggregate principal amount of the Subordinated Securities of any series outstanding under the Subordinated Indenture may waive, on behalf of all Holders of such series, an Event of Default resulting in acceleration of such Subordinated Securities, but only if all Defaults have been remedied and all payments due (other than those due as a result of acceleration) have been made. (Section 7.02) If a Default occurs and is continuing, the Subordinated Trustee may in its discretion, and at the written request of Holders of not less than a majority in aggregate principal amount of the Subordinated Securities of any series outstanding under the Subordinated Indenture and upon reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request and subject to certain other conditions set forth in the Subordinated Indenture shall, proceed to protect the rights of the Holders of all the 16 37 Subordinated Securities of such series. (Section 7.03) Prior to acceleration of maturity of the Subordinated Securities of any series outstanding under the Subordinated Indenture, the Holders of a majority in aggregate principal amount of such Subordinated Securities may waive any past Default under the Subordinated Indenture except a Default in the payment of principal of, premium, if any, or interest on the Subordinated Securities of such series or in respect of a covenant which cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. (Section 7.13) The Subordinated Indenture provides that in the event of a Default specified in clauses (b) or (c) of the immediately preceding paragraph in payment of principal of, premium, if any, or interest on any Subordinated Security of any series, Fleet will, upon demand of the Subordinated Trustee, pay to it, for the benefit of the holder of any such Subordinated Security, the whole amount then due and payable on such Subordinated Security for principal, premium, if any, and interest. The Subordinated Indenture further provides that if Fleet fails to pay such amount forthwith upon such demand, the Subordinated Trustee may, among other things, institute a judicial proceeding for the collection thereof. (Section 7.03) The Subordinated Indenture also provides that notwithstanding any other provision of the Subordinated Indenture, the holder of any Subordinated Security of any series shall have the right to institute suit for the enforcement of any payment of principal of, premium, if any, and interest on such Subordinated Security on the respective Stated Maturities (as defined in the Subordinated Indenture) expressed in such Subordinated Security and that such right shall not be impaired without the consent of such holder. (Section 7.08) Fleet is required to furnish to the Subordinated Trustee annually a statement as to performance by Fleet of certain of its obligations under the Subordinated Indenture and as to any Default in such performance. (Section 5.10) DESCRIPTION OF WARRANTS Fleet may issue Warrants for the purchase of Debt Securities. Warrants may be issued independently or together with Debt Securities offered by any Prospectus Supplement and may be attached to or separate from such Debt Securities. The Warrants are to be issued under Warrant Agreements to be entered into between Fleet and a bank or trust company, as Warrant Agent, all as set forth in the Prospectus Supplement relating to the particular issue of Warrants. The Warrant Agent will act solely as an agent of Fleet in connection with the Warrant Certificates and will not assume any obligation or relationship of agency or trust for or with any holders of Warrant Certificates or beneficial owners of Warrants. Copies of the forms of Warrant Agreements, including the forms of Warrant Certificates representing the Warrants, are filed as exhibits to the Registration Statement to which this Prospectus pertains. The following summaries of certain provisions of the forms of Warrant Agreements and Warrant Certificates do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the Warrant Agreements and the Warrant Certificates. GENERAL If Warrants are offered, the applicable Prospectus Supplement will describe the terms of the Warrants, including the following: (1) the offering price; (2) the currency for which Warrants may be purchased; (3) the designation, aggregate principal amount, currency, priority of payment and terms of the Debt Securities purchasable upon exercise of the Warrants; (4) if applicable, the designation and terms of the Debt Securities with which the Warrants are issued and the number of Warrants issued with each such Debt Security; (5) if applicable, the date on and after which the Warrants and the related Debt Securities will be separately transferable; (6) the principal amount of Debt Securities purchasable upon exercise of one Warrant and the price at and currency in which such principal amount of Debt Securities may be purchased upon such exercise; (7) the date on which the right to exercise the Warrants shall commence and the date on which such right shall expire (the "Expiration Date"); (8) certain federal income tax consequences of holding or exercising Warrants; (9) whether the Warrants represented by the Warrant Certificates will be issued in 17 38 registered or bearer form; and (10) any other terms of the Warrants (which shall not be inconsistent with the provisions of the applicable Warrant Agreement). Warrant Certificates may be exchanged for new Warrant Certificates of different denominations, may (if in registered form) be presented for registration of transfer, and may be exercised at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement. Prior to the exercise of their Warrants, holders of Warrants will not have any of the rights of holders of the Debt Securities purchasable upon such exercise, including the right to receive payments of principal of, premium, if any, or interest, if any, on the Debt Securities purchasable upon such exercise or to enforce covenants in the applicable Indenture. EXERCISE OF WARRANTS Each Warrant will entitle the holder to purchase such principal amount of Debt Securities at such exercise price as shall in each case be set forth in, or calculable from, the Prospectus Supplement relating to the Warrants. Warrants may be exercised at any time up to 5:00 P.M. New York time on the Expiration Date set forth in the Prospectus Supplement relating to such Warrants. After the close of business on the Expiration Date (or such later date to which such Expiration Date may be extended by Fleet), unexercised Warrants will become void. Warrants may be exercised by delivery of payment to the Warrant Agent as provided in the applicable Prospectus Supplement of the amount required to purchase the Debt Securities purchasable upon such exercise together with certain information set forth on the reverse side of the Warrant Certificate. Warrants will be deemed to have been exercised upon receipt of the exercise price, subject to the receipt, within five business days, of the Warrant Certificate evidencing such Warrants. Upon receipt of such payment and the Warrant Certificate properly completed and duly executed at the corporate trust office of the Warrant Agent or any other office indicated in the applicable Prospectus Supplement, Fleet will, as soon as practicable, issue and deliver pursuant to the applicable Indenture the Debt Securities purchasable upon such exercise. If fewer than all of the Warrants represented by such Warrant Certificate are exercised, a new Warrant Certificate will be issued for the remaining amount of Warrants. PLAN OF DISTRIBUTION Fleet may sell Debt Securities and Warrants to or through underwriters, and also may sell Debt Securities and Warrants through agents (which are registered broker-dealers or banks) which may be affiliates. The distribution of the Debt Securities and Warrants may be effected from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Each Prospectus Supplement will describe the method of distribution of the Debt Securities and Warrants. Certain restrictions relating to distribution of Debt Securities in connection with an International Offering will be set forth in the applicable Prospectus Supplement. In connection with the sale of Debt Securities and Warrants, underwriters or agents acting on Fleet's behalf may receive compensation from Fleet or from purchasers of Debt Securities and Warrants for whom they may act as agents, in the form of discounts, concessions or commissions. The underwriters, dealers and agents that participate in the distribution of Debt Securities and Warrants may be deemed to be underwriters under the Act and any discounts or commissions received by them and any profits on the resale of Debt Securities and Warrants by them may be deemed to be underwriting discounts and commissions under the Act. Any such underwriter will be identified and any such compensation will be described in the applicable Prospectus Supplement. Under agreements which may be entered into by Fleet, underwriters, dealers and agents who participate in the distribution of Debt Securities and Warrants may be entitled to indemnification by Fleet against certain liabilities, including liabilities under the Act, and to certain rights of contribution from Fleet. 18 39 If so indicated in the applicable Prospectus Supplement, Fleet will authorize underwriters or other persons acting as Fleet's agents to solicit offers by certain institutions to purchase Debt Securities and Warrants from Fleet pursuant to delayed delivery contracts providing for payment and delivery on a future date or dates stated in the applicable Prospectus Supplement. Each such contract will be for an amount not less than, and the aggregate amount of Debt Securities sold pursuant to such contracts shall not be less nor more than, the respective amounts stated in the applicable Prospectus Supplement. Institutions with which such contracts may be made include commercial and savings banks, insurance companies, pension funds, investment companies, educational and charitable institutions and others, but in all cases such institutions must be approved by Fleet. The obligations of any purchaser under any such contract will not be subject to any condition except that (1) the purchase of the Debt Securities and Warrants shall not at the time of delivery be prohibited under the laws of the jurisdiction to which such purchaser is subject, and (2) if the Debt Securities and Warrants are also being sold to underwriters acting as principals for their own account, the underwriters shall have purchased such Debt Securities and Warrants not sold for delayed delivery. The underwriters and such other persons will not have any responsibility in respect of the validity or performance of such contracts. Certain of the underwriters may be customers of, including borrowers from, engage in transactions with, and perform services for, Fleet or one or more of its affiliates in the ordinary course of business. LEGAL OPINIONS The validity of the Debt Securities and Warrants offered in the applicable Prospectus Supplement will be passed upon for Fleet by Edwards & Angell, One Hospital Trust Plaza, Providence, Rhode Island 02903, and for the Underwriters by Cravath, Swaine & Moore, 825 Eighth Avenue, New York, New York 10019. V. Duncan Johnson, a partner of Edwards & Angell, is a director of Fleet Bank-R1. EXPERTS The consolidated financial statements of Fleet appearing in Fleet's 1991 Annual Report to Stockholders and incorporated by reference in Fleet's 1991 Annual Report on Form 10-K (as amended by a Form 8 dated October 21, 1992) for the year ended December 31, 1991, have been audited by KPMG Peat Marwick, independent auditors, as set forth in their report included in Fleet's 1991 Annual Report to Stockholders and incorporated by reference in Fleet's 1991 Annual Report on Form 10-K (as amended by a Form 8 dated October 21, 1992). Such financial statements are incorporated by reference herein in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. 19 40 - ------------------------------------------------------- - ------------------------------------------------------- - ------------------------------------------------------- - ------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY FLEET OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF FLEET SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ------------------------ TABLE OF CONTENTS
PAGE ---- PROSPECTUS SUPPLEMENT Available Information.................. S-2 Incorporation of Certain Documents by Reference............................ S-2 Fleet Financial Group, Inc. ........... S-3 Use of Proceeds........................ S-4 Summary Consolidated Financial Data.... S-5 Management's Analysis of Financial Statements........................... S-7 Description of Notes................... S-16 Underwriting........................... S-19 Experts................................ S-19 Legal Opinions......................... S-20 PROSPECTUS Available Information.................. 2 Incorporation of Certain Documents by Reference............................ 2 Fleet Financial Group, Inc............. 2 Consolidated Ratios of Earnings to Fixed Charges........................ 6 Use of Proceeds........................ 6 Description of Debt Securities......... 6 Senior Securities...................... 12 Subordinated Securities................ 14 Description of Warrants................ 17 Plan of Distribution................... 18 Legal Opinions......................... 19 Experts................................ 19
$200,000,000 FLEET FINANCIAL GROUP, INC. [LOGO] 7 1/4% NOTES DUE 1999 --------------------------- PROSPECTUS SUPPLEMENT --------------------------- MERRILL LYNCH & CO. CS FIRST BOSTON GOLDMAN, SACHS & CO. SALOMON BROTHERS INC DATED AUGUST 30, 1994 - ------------------------------------------------------- - ------------------------------------------------------- - ------------------------------------------------------- - ------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----